A Laplace approximation to the moments of a ratio of quadratic forms

Abstract

SUMMARY The Laplace method for approximating integrals is applied to give a general approximation for the k th moment of a ratio of quadratic forms in random variables. The technique utilises the existence of a dominating peak at the boundary point on the range of integration. As closed form and tractable formulae do not exist in general, this simple approximation, which only entails basic algebraic operations, has evident practical appeal. We exploit the approximation to provide an approximate mean-bias function for the least squares estimator of the coefficient of the lag dependent variable in a first-order stochastic difference equation.