An explicit variance formula for the Box-Cox functional form estimator

Abstract

Although the Box-Cox transformation provides a flexible functional form for regression models, its applicability is often hampered by the difficulty of choosing an appropriate value for the Box-Cox parameter. This paper presents an explicit variance formula for the Box-Cox estimator of the functional form, from which the analytical behavior of the estimator and its precision can be assessed. © 2002 Elsevier Science B.V. All rights reserved.