Preinerstorfer, David (2014): Finite Sample Properties of Tests Based on Prewhitened Nonparametric Covariance Estimators.
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Abstract
We analytically investigate size and power properties of a popular family of procedures for testing linear restrictions on the coefficient vector in a linear regression model with temporally dependent errors. The tests considered are autocorrelation-corrected F-type tests based on prewhitened nonparametric covariance estimators that possibly incorporate a data-dependent bandwidth parameter, e.g., estimators as considered in Andrews and Monahan (1992), Newey and West (1994), or Rho and Shao (2013). For design matrices that are generic in a measure theoretic sense we prove that these tests either suffer from extreme size distortions or from strong power deficiencies. Despite this negative result we demonstrate that a simple adjustment procedure based on artificial regressors can often resolve this problem.
Item Type: | MPRA Paper |
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Original Title: | Finite Sample Properties of Tests Based on Prewhitened Nonparametric Covariance Estimators |
Language: | English |
Keywords: | Autocorrelation robustness, HAC test, fixed-b test, prewhitening, size distortion, power deficiency, artificial regressors. |
Subjects: | C - Mathematical and Quantitative Methods > C1 - Econometric and Statistical Methods and Methodology: General > C12 - Hypothesis Testing: General C - Mathematical and Quantitative Methods > C3 - Multiple or Simultaneous Equation Models ; Multiple Variables > C32 - Time-Series Models ; Dynamic Quantile Regressions ; Dynamic Treatment Effect Models ; Diffusion Processes ; State Space Models |
Item ID: | 58333 |
Depositing User: | David Preinerstorfer |
Date Deposited: | 06 Sep 2014 10:12 |
Last Modified: | 04 Oct 2019 06:00 |
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URI: | https://mpra.ub.uni-muenchen.de/id/eprint/58333 |
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