The $α$--regression for compositional data: a unified framework for standard, spatially-lagged, and geographically-weighted regression models
By: Michail Tsagris
Potential Business Impact:
Helps scientists understand how parts make up a whole.
Compositional data-vectors of non--negative components summing to unity--frequently arise in scientific applications where covariates influence the relative proportions of components, yet traditional regression approaches struggle with the unit-sum constraint and zero values. This paper revisits the $\alpha$--regression framework, which uses a flexible power transformation parameterized by $\alpha$ to interpolate between raw data analysis and log-ratio methods, naturally handling zeros without imputation while allowing data-driven transformation selection. We formulate $\alpha$--regression as a non-linear least squares problem, provide efficient estimation via the Levenberg-Marquardt algorithm with explicit gradient and Hessian derivations, establish asymptotic normality of the estimators, and derive marginal effects for interpretation. The framework is extended to spatial settings through two models: the $\alpha$--spatially lagged X regression model, which incorporates spatial spillover effects via spatially lagged covariates with decomposition into direct and indirect effects, and the geographically weighted $\alpha$--regression, which allows coefficients to vary spatially for capturing local relationships. Application to Greek agricultural land-use data demonstrates that spatial extensions substantially improve predictive performance.
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