Fractional Probit with Cross-Sectional Volatility: Bridging Heteroskedastic Probit and Fractional Response Models

This paper introduces a new econometric framework for modeling fractional outcomes bounded between zero and one. We propose the Fractional Probit with Cross-Sectional Volatility (FPCV), which specifies the conditional mean through a probit link and allows the conditional variance to depend on observable heterogeneity. The model extends heteroskedastic probit methods to fractional responses and unifies them with existing approaches for proportions. Monte Carlo simulations demonstrate that the FPCV estimator achieves lower bias, more reliable inference, and superior predictive accuracy compared with standard alternatives. The framework is particularly suited to empirical settings where fractional outcomes display systematic variability across units, such as participation rates, market shares, health indices, financial ratios, and vote shares. By modeling both mean and variance, FPCV provides interpretable measures of volatility and offers a robust tool for empirical analysis and policy evaluation.

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Publication Details

Journal
Econometrics
Published
2025-11-03
DOI
https://doi.org/10.3390/econometrics13040043
Citations
2
Primary Topic
Financial Risk and Volatility Modeling
Type
article
Field-Weighted Citation Impact
4.42
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article

Fractional Probit with Cross-Sectional Volatility: Bridging Heteroskedastic Probit and Fractional Response Models

Aree Wiboonpongse, Jittaporn Sriboonjit, Woraphon Yamaka, Songsak Sriboonchitta
2 citations
Econometrics
Financial Risk and Volatility Modeling
4.42
article

Fractional Probit with Cross-Sectional Volatility: Bridging Heteroskedastic Probit and Fractional Response Models

Aree Wiboonpongse, Jittaporn Sriboonjit, Woraphon Yamaka, Songsak Sriboonchitta
article en
2 citations

Abstract

This paper introduces a new econometric framework for modeling fractional outcomes bounded between zero and one. We propose the Fractional Probit with Cross-Sectional Volatility (FPCV), which specifies the conditional mean through a probit link and allows the conditional variance to depend on observable heterogeneity. The model extends heteroskedastic probit methods to fractional responses and unifies them with existing approaches for proportions. Monte Carlo simulations demonstrate that the FPCV estimator achieves lower bias, more reliable inference, and superior predictive accuracy compared with standard alternatives. The framework is particularly suited to empirical settings where fractional outcomes display systematic variability across units, such as participation rates, market shares, health indices, financial ratios, and vote shares. By modeling both mean and variance, FPCV provides interpretable measures of volatility and offers a robust tool for empirical analysis and policy evaluation.

EconometricsVol. 13(4)
Thammasat University (TH), Chiang Mai University (TH)
Openalex Percentile: Top 5%
Financial Risk and Volatility Modeling
4.42
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Fractional Probit with Cross-Sectional Volatility: Bridging Heteroskedastic Probit and Fractional Response Models — Aree Wiboonpongse, Jittaporn Sriboonjit, et al. · Econometrics (2025) | TGRS Research Map | TGRS