BAND COVARIANCE-MATRIX ESTIMATION USING RESTRICTED RESIDUALS - A MONTE-CARLO ANALYSIS

• 成果类型: Article
• 署名作者: LIGERALDE, AV; BROWN, BW
• 署名单位: Rice University
• 刊物名称: INTERNATIONAL ECONOMIC REVIEW
• ISSN/ISSBN: 0020-6598
• DOI: 10.2307/2527369
• 发表日期: 1995
• 页码: 751-767
• 关键词: exchange-rates; sample properties; heteroskedasticity; heteroscedasticity; variance

摘要

Using Monte Carlo simulations, we examine the performance of Wald-type test statistics based on alternative versions of a heteroskedasticity consistent band covariance matrix estimator which is algorithmically constrained to be positive definite in finite samples. We find that the test statistic based on the originally proposed estimator tends to result in excessive Type I errors. This problem can be alleviated to some extent by employing a quasi-maximum likelihood procedure. However, by simply using restricted, as opposed to the usual OLS residuals when constructing the band covariance matrix estimator, excessive Type I errors can be substantially reduced, if not eliminated.