This paper argues that the half-Cauchy distribution should replace the inverse-Gamma distribution as a default prior for a top-level scale parameter in Bayesian hierarchical models, at least for cases where a proper prior is necessary. Our arguments involve a blend of Bayesian and frequentist reasoning, and are intended to complement the case made by Gelman (2006) in support of folded- priors. First, we generalize the half-Cauchy prior to the wider class of hypergeometric inverted-beta priors. We derive expressions for posterior moments and marginal densities when these priors are used for a top-level normal variance in a Bayesian hierarchical model. We go on to prove a proposition that, together with the results for moments and marginals, allows us to characterize the frequentist risk of the Bayes estimators under all global-shrinkage priors in the class. These results, in turn, allow us to study the frequentist properties of the half-Cauchy prior versus a wide class of alternatives. The half-Cauchy occupies a sensible middle ground within this class: it performs well near the origin, but does not lead to drastic compromises in other parts of the parameter space. This provides an alternative, classical justification for the routine use of this prior. We also consider situations where the underlying mean vector is sparse, where we argue that the usual conjugate choice of an inverse-gamma prior is particularly inappropriate, and can severely distort inference. Finally, we summarize some open issues in the specification of default priors for scale terms in hierarchical models.
Nicholas G. Polson. James G. Scott. "On the Half-Cauchy Prior for a Global Scale Parameter." Bayesian Anal. 7 (4) 887 - 902, December 2012. https://doi.org/10.1214/12-BA730