Local Marginal Analysis of Spatial Data: A Gaussian Process Regression Approach with Bayesian Model and Kernel Averaging

• Published in: Spatial Econometrics: Qualitative and Limited Dependent Variables Vol. 37; pp. 297 - 342
• Main Authors: Dearmon, Jacob, Smith, Tony E
• Format: Book Chapter
• Language: English
• Published: Emerald Group Publishing Limited 01.01.2017
• Subjects: Econometrics; Economics; Mathematical/quantitative economics; Gaussian process regression; bayesian model averaging; local spatial analysis
• ISBN: 9781785609862; 1785609866
• ISSN: 0731-9053
• DOI: 10.1108/S0731-905320160000037018

Abstract Statistical methods of spatial analysis are often successful at either prediction or explanation, but not necessarily both. In a recent paper, Dearmon and Smith (2016) showed that by combining Gaussian Process Regression (GPR) with Bayesian Model Averaging (BMA), a modeling framework could be developed in which both needs are addressed. In particular, the smoothness properties of GPR together with the robustness of BMA allow local spatial analyses of individual variable effects that yield remarkably stable results. However, this GPR-BMA approach is not without its limitations. In particular, the standard (isotropic) covariance kernel of GPR treats all explanatory variables in a symmetric way that limits the analysis of their individual effects. Here we extend this approach by introducing a mixture of kernels (both isotropic and anisotropic) which allow different length scales for each variable. To do so in a computationally efficient manner, we also explore a number of Bayes-factor approximations that avoid the need for costly reversible-jump Monte Carlo methods. To demonstrate the effectiveness of this Variable Length Scale (VLS) model in terms of both predictions and local marginal analyses, we employ selected simulations to compare VLS with Geographically Weighted Regression (GWR), which is currently the most popular method for such spatial modeling. In addition, we employ the classical Boston Housing data to compare VLS not only with GWR but also with other well-known spatial regression models that have been applied to this same data. Our main results are to show that VLS not only compares favorably with spatial regression at the aggregate level but is also far more accurate than GWR at the local level.