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The QUANTREG Procedure

Optimization Algorithms

The optimization problem for median regression has been formulated and solved as a linear programming (LP) problem since the 1950s. Variations of the simplex algorithm, especially the method of Barrodale and Roberts (1973), have been widely used to solve this problem. The simplex algorithm is computationally demanding in large statistical applications, and in theory the number of iterations can increase exponentially with the sample size. This algorithm is often useful with data containing no more than tens of thousands of observations.

Several alternatives have been developed to handle regression for larger data sets. The interior point approach of Karmarkar (1984) solves a sequence of quadratic problems in which the relevant interior of the constraint set is approximated by an ellipsoid. The worst-case performance of the interior point algorithm has been proved to be better than that of the simplex algorithm. More important, experience has shown that the interior point algorithm is advantageous for larger problems.

Like regression, general quantile regression fits nicely into the standard primal-dual formulations of linear programming.

In addition to the interior point method, various heuristic approaches are available for computing -type solutions. Among these, the finite smoothing algorithm of Madsen and Nielsen (1993) is the most useful. It approximates the -type objective function with a smoothing function, so that the Newton-Raphson algorithm can be used iteratively to obtain a solution after a finite number of iterations. The smoothing algorithm extends naturally to general quantile regression.

The QUANTREG procedure implements the simplex, interior point, and smoothing algorithms. The remainder of this section describes these algorithms in more detail.

Simplex Algorithm

Let , , , and , where is the nonnegative part of .

Let . For the problem, the simplex approach solves by reformulating it as the constrained minimization problem

     

where denotes an vector of ones.

Let , , and , where . The reformulation presents a standard LP problem:

     
     
     

This problem has the dual formulation

     
     

which can be simplified as

     

By setting , the problem becomes

     

For quantile regression, the minimization problem is , and a similar set of steps leads to the dual formulation

     

The QUANTREG procedure solves this LP problem by using the simplex algorithm of Barrodale and Roberts (1973). This algorithm solves the primary LP problem (P) by two stages, which exploit the special structure of the coefficient matrix . The first stage picks the columns in or as pivotal columns. The second stage interchanges the columns in or as basis or nonbasis columns, respectively. The algorithm obtains an optimal solution by executing these two stages interactively. Moreover, because of the special structure of , only the main data matrix is stored in the current memory.

Although this special version of the simplex algorithm was introduced for median regression, it extends naturally to quantile regression for any given quantile and even to the entire quantile process (Koenker and d’Orey 1994). It greatly reduces the computing time required by the general simplex algorithm, and it is suitable for data sets with fewer than 5,000 observations and 50 variables.

Interior Point Algorithm

There are many variations of interior point algorithms. The QUANTREG procedure uses the primal-dual predictor-corrector algorithm implemented by Lustig, Marsden, and Shanno (1992). The text by Roos, Terlaky, and Vial (1997) provides more information about this particular algorithm. The following brief introduction of this algorithm uses the notation in the first reference.

To be consistent with the conventional LP setting, let , , and let be the general upper bound. The linear program to be solved is

subject to

To simplify the computation, this is treated as the primal problem. The problem has variables. The index denotes a variable number, and denotes an iteration number. If is used as a subscript or superscript, it denotes "of iteration ."

Let be the primal slack so that . Associate dual variables with these constraints. The interior point algorithm solves the system of equations to satisfy the Karush-Kuhn-Tucker (KKT) conditions for optimality:

where

(that is, if , otherwise)

These are the conditions for feasibility, with the addition of complementarity conditions and . must occur at the optimum. Complementarity forces the optimal objectives of the primal and dual to be equal, , as

Therefore

The duality gap, , is used to measure the convergence of the algorithm. You can specify a tolerance for this convergence criterion with the TOLERANCE= option in the PROC statement.

Before the optimum is reached, it is possible for a solution to violate the KKT conditions in one of several ways:

  • Primal bound constraints can be broken, .

  • Primal constraints can be broken, .

  • Dual constraints can be broken, .

  • Complementarity conditions are unsatisfied, and .

The interior point algorithm works by using Newton’s method to find a direction to move from the current solution toward a better solution:

     

is the step length and is assigned a value as large as possible, but not so large that a or is "too close" to zero. You can control the step length with the KAPPA= option in the PROC statement.

The QUANTREG procedure implements a predictor-corrector variant of the primal-dual interior point algorithm. First, Newton’s method is used to find a direction in which to move. This is known as the affine step.

In iteration , the affine step system that must be solved is

Therefore, the computations involved in solving the affine step are

is the step length as before.

The success of the affine step is gauged by calculating the complementarity of and at and comparing it with the complementarity at the starting point . If the affine step was successful in reducing the complementarity by a substantial amount, the need for centering is not great, and a value close to zero is assigned to in a second linear system (see following), which is used to determine a centering vector. If, however, the affine step was unsuccessful, then centering is deemed beneficial, and a value close to 1.0 is assigned to . In other words, the value of is adaptively altered depending on progress made toward the optimum.

The following linear system is solved to determine a centering vector from :

where

, complementarity at the start of the iteration

, the affine complementarity

, the average complementarity

Therefore, the computations involved in solving the centering step are

Then

where, as before, is the step length assigned a value as large as possible, but not so large that a , , , or is "too close" to zero.

Although the predictor-corrector variant entails solving two linear systems instead of one, fewer iterations are usually required to reach the optimum. The additional overhead of the second linear system is small because the matrix has already been factorized in order to solve the first linear system.

You can specify the starting point with the INEST= option in the PROC statement. By default, the starting point is set to be the least squares estimate.

Smoothing Algorithm

To minimize the sum of the absolute residuals , the smoothing algorithm approximates the nondifferentiable function by the following smooth function, which is referred to as the Huber function:

     

where

     

Here , and the threshold is a positive real number. The function is continuously differentiable and a minimizer of is close to a minimizer of when is close to zero.

The advantage of the smoothing algorithm as described in Madsen and Nielsen (1993) is that the solution can be detected when is small. In other words, it is not necessary to let converge to zero in order to find a minimizer of . The algorithm terminates before going through the entire sequence of values of that are generated by the algorithm. Convergence is indicated by no change of the status of residuals as goes through this sequence.

The smoothing algorithm extends naturally from regression to general quantile regression; refer to Chen (2007). The function

     

can be approximated by the smooth function

     

where

     

The function is determined by whether , , or . These inequalities divide into subregions separated by the parallel hyperplanes and . The set of all such hyperplanes is denoted by :

     

Define the sign vector as

     

and introduce

     

Therefore,

     
     

yielding

     

where is the diagonal matrix with diagonal elements , , , and .

The gradient of is given by

     

and for the Hessian exists and is given by

     

The gradient is a continuous function in , whereas the Hessian is piecewise constant.

Following Madsen and Nielsen (1993), the vector is referred to as a -feasible sign vector if there exists with . If is -feasible, then is defined as the quadratic function that is derived from by substituting for . Thus, for any with ,

     

In the domain

     

For each and , there can be one or several corresponding quadratics . If then is characterized by and , but for the quadratic is not unique. Therefore, a reference

     

determines the quadratic.


Again following Madsen and Nielsen (1993), let

be a feasible reference if is a -feasible sign vector with , and

be a solution reference if it is feasible and minimizes .

The smoothing algorithm for minimizing is based on minimizing for a set of decreasing . For each new value of , information from the previous solution is used. Finally, when is small enough, a solution can be found by the modified Newton-Raphson algorithm as stated by Madsen and Nielsen (1993):

find an initial solution reference

repeat

decrease

find a solution reference

until

is the solution.

By default, the initial solution reference is found by letting be the least squares solution. Alternatively, you can specify the initial solution reference with the INEST= option in the PROC statement. Then and are chosen according to these initial values.

There are several approaches for determining a decreasing sequence of values of . The QUANTREG procedure uses a strategy by Madsen and Nielsen (1993). The computation involved is not significant comparing with the Newton-Raphson step. You can control the ratio of consecutive decreasing values of with the RRATIO= suboption of the ALGORITHM= option in the PROC statement. By default,

     

For the and quantile regression, it turns out that the smoothing algorithm is very efficient and competitive, especially for a fat data set—namely, when and is dense. Refer to Chen (2007) for a complete smoothing algorithm and details.

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