Newey–West covariance matrix estimates for models with generated regressors
Smith, Jeremy (Jeremy P.) and McAleer, M.. (1994) Newey–West covariance matrix estimates for models with generated regressors. Applied Economics, Volume 26 (Number 6). pp. 635-640. ISSN 0003-6846Full text not available from this repository.
Official URL: http://dx.doi.org/10.1080/00036849400000034
The performance of the Newey and West (1987) heteroscedasticity and autocorrelation consistent covariance matrix for models with generated regressors is examined. The presence of a generated regressor results in the covariance matrix of the disturbance term being non-spherical, with both non-zero off-diagonal and non-constant diagonal elements. The Newey-West procedure is potentially a simple method of calculating consistent standard errors, and is available in a wide range of econometric software programs. For this reason, it would seem to be sensible to examine the small-sample performance of the Newey-West standard errors. However, the evidence from Monte Carlo experiments suggests that the Newey-West procedure performs no better than the (incorrect) two-step ordinary least squares (OLS) procedure, a finding which is supported by two illustrative empirical applications.
|Item Type:||Journal Article|
|Subjects:||H Social Sciences > HC Economic History and Conditions|
|Divisions:||Faculty of Social Sciences > Economics|
|Journal or Publication Title:||Applied Economics|
|Publisher:||Taylor & Francis Ltd.|
|Number of Pages:||6|
|Page Range:||pp. 635-640|
|Access rights to Published version:||Restricted or Subscription Access|
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