This article is a brief introduction to kcmeans
.
library(kcmeans)
set.seed(51944)
To illustrate kcmeans
, consider simulating a small
dataset with a continuous outcome variable y
, two observed
predictors – a categorical variable Z
and a continuous
variable X
– and an (unobserved) Gaussian error. As in
Wiemann (2023), the reduced form has an unobserved lower-dimensional
representation dependent on the latent categorical variable
Z0
.
# Sample parameters
= 800 # sample size
nobs # Sample data
<- rnorm(nobs)
X <- sample(1:20, nobs, replace = T)
Z <- Z %% 4 # lower-dimensional latent categorical variable
Z0 <- Z0 + X + rnorm(nobs) y
kcmeans
is then computed by combining the categorical
feature with the continuous feature. By default, the categorical feature
is the first column. Alternatively, the column corresponding to the
categorical feature can be set via the which_is_cat
argument. Computation is very quick – indeed the dynamic
programming algorithm of the leveraged Ckmeans.1d.dp
package is polynomial in the number of values taken by the categorical
feature Z
. See also ?kcmeans
for details.
system.time({
<- kcmeans(y = y, X = cbind(Z, X), K = 4)
kcmeans_fit })
## user system elapsed
## 0.784 0.027 0.668
We may now use the predict.kcmeans
method to construct
fitted values and/or compute predictions of the lower-dimensional latent
categorical feature Z0
. See also
?predict.kcmeans
for details.
# Predicted values for the outcome + R^2
<- predict(kcmeans_fit, cbind(Z, X))
y_hat round(1 - mean((y - y_hat)^2) / mean((y - mean(y))^2), 3)
## [1] 0.695
# Predicted values for the latent categorical feature + missclassification rate
<- predict(kcmeans_fit, cbind(Z, X), clusters = T) - 1
Z0_hat mean((Z0 - Z0_hat)!=0)
## [1] 0
Finally, it is also straightforward to compute standard errors for
the final coefficients, e.g., using summary.lm
:
# Compute the linear regression object and call summary.lm
<- lm(y ~ as.factor(Z0_hat) + X)
lm_fit summary(lm_fit)
##
## Call:
## lm(formula = y ~ as.factor(Z0_hat) + X)
##
## Residuals:
## Min 1Q Median 3Q Max
## -3.1205 -0.6916 0.0544 0.6700 3.4201
##
## Coefficients:
## Estimate Std. Error t value Pr(>|t|)
## (Intercept) 0.03897 0.07434 0.524 0.6
## as.factor(Z0_hat)1 0.88393 0.10265 8.611 <2e-16 ***
## as.factor(Z0_hat)2 1.88314 0.10271 18.334 <2e-16 ***
## as.factor(Z0_hat)3 3.01094 0.10636 28.310 <2e-16 ***
## X 1.04636 0.03541 29.549 <2e-16 ***
## ---
## Signif. codes: 0 '***' 0.001 '**' 0.01 '*' 0.05 '.' 0.1 ' ' 1
##
## Residual standard error: 1.03 on 795 degrees of freedom
## Multiple R-squared: 0.6954, Adjusted R-squared: 0.6939
## F-statistic: 453.7 on 4 and 795 DF, p-value: < 2.2e-16
Wiemann T (2023). “Optimal Categorical Instruments.” https://arxiv.org/abs/2311.17021