Practical Proposals for Specifying k-Nearest Neighbours Weights Matrices

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Title: Practical Proposals for Specifying k-Nearest Neighbours Weights Matrices
Author: Gerkman, Linda; Ahlgren, Niklas
Belongs to series: Working Paper - 555
ISSN: 0357-4598
ISBN: 978-952-232-133-6
Abstract: In this article we introduce and evaluate testing procedures for specifying the number k of nearest neighbours in the weights matrix of spatial econometric models. The spatial J-test is used for specification search. Two testing procedures are suggested: an increasing neighbours testing procedure and a decreasing neighbours testing procedure. Simulations show that the increasing neighbours testing procedures can be used in large samples to determine k. The decreasing neighbours testing procedure is found to have low power, and is not recommended for use in practice. An empirical example involving house price data is provided to show how to use the testing procedures with real data.
Date: 2011-06-01
Subject: k-nearest neighbours
model specification
spatial j-test
weights matrix

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