Finite sample performance of the robust Wald test in simultaneous equation systems

Calzolari, Giorgio and Panattoni, Lorenzo (1987): Finite sample performance of the robust Wald test in simultaneous equation systems. Published in: Advances in Econometrics, ed. by G.F.Rhodes Jr. and T.B.Fomby , Vol. 7, No. Greenwich: JAI Press Inc. (1988): pp. 163-191.

Abstract

The estimator of the coefficient covariance matrix proposed in White (1982)can be used to robustify the classical Wald test. Sampling experiments recently performed on linear regressions and simultaneous equation models, however, suggest that such an estimator tends to underestimate the covariance matrix if the model is correctly specified. In the classical framework of simultaneous equation systems, this paper aims at investigating the consequences of the use of robust covariance matrix estimator in the Wald test, when there is no misspecification.

• Item Type: MPRA Paper
• Language: English
• Keywords: Simultaneous equations; Wald test; robust covariance matrix estimator; Monte Carlo
• Subjects: C - Mathematical and Quantitative Methods > C1 - Econometric and Statistical Methods and Methodology: General > C15 - Statistical Simulation Methods: General; C - Mathematical and Quantitative Methods > C3 - Multiple or Simultaneous Equation Models ; Multiple Variables > C30 - General

References

Amemiya,T. (1977), "The Maximum Likelihood and the Nonlinear Three-Stage Least Squares Estimator in the General Nonlinear Simultaneous Equation Model", Econometrica 45, 955-968.

Belsley,D.A. (1980), "On the Efficient Computation of the Nonlinear Full-Information Maximum-Likelihood Estimator", Journal of Econometrics 14, 203-225.

Berndt,E., and N.E.Savin (1977), "Conflict Among Criteria for Testing Hypotheses in the Multivariate Linear Regression Model", Econometrica 45, 1263-1278.

Bhargava,A. (1987), "Wald Tests and Systems of Stochastic Equations". International Economic Review 28, 789-808.

Breusch,T.S. (1979), "Conflict Among Criteria for Testing Hypotheses: Extensions and Comments", Econometrica 47,203-207.

Calzolari,G., and L.Panattoni (1984), "A Simulation Study on FIML Covariance Matrix". Pisa: Centro Scientifico IBM, discussion paper presented at the European Meeting of the Econometric Society, Madrid.

Calzolari,G., and L.Panattoni (1988), "Alternative Estimators of FIML Covariance Matrix: A Monte Carlo Study", Econometrica 56, 701-714.

Calzolari,G., L.Panattoni, and C.Weihs (1987), "Computational Efficiency of FIML Estimation", Journal of Econometrics 36, 299-310.

Chesher,A. and I.Jewitt (1984), "Finite Sample Properties of Least Square Covariance Matrix Estimators". University of Bristol: Department of Economics, discussion paper No.163.

Chesher,A. and I.Jewitt (1987), "The Bias of a Heteroskedasticity Consistent Covariance Matrix Estimator", Econometrica 55, 1217-1222.

Davidson,R., and J.G.MacKinnon (1981), "Efficient Estimation of Tail-Area Probabilities in Sampling Experiments", Economics Letters 8, 73-77.

Davidson,R., and J.G.MacKinnon (1983), "Small Sample Properties of Alternative Forms of the Lagrange Multiplier Test", Economics Letters 12, 269-275.

Domowitz,I., and H.White (1982), "Misspecified Models with Dependent Observations", Journal of Econometrics 20, 35-58.

Engle,R.F. (1984), "Wald, Likelihood Ratio, and Lagrange Multiplier Tests in Econometrics", in Handbook of Econometrics, ed. by Z.Griliches and M.D.Intriligator. Amsterdam: North-Holland, Vol.2, 775-826.

Evans,G.B.A., and N.E.Savin (1982), "Conflict Among the Criteria Revisited: The W, LR and LM Tests", Econometrica 50, 737-748.

Gourieroux,C., A.Monfort, and A.Trognon (1984), "Pseudo Maximum Likelihood Methods: Theory", Econometrica 52, 681-700.

Klein,L.R. (1950), Economic Fluctuations in the United States, 1921-1941. New York: John Wiley, Cowles Commission Monograph No.11.

MacKinnon,J.G., and H.White (1985), "Some Heteroskedasticity-Consistent Covariance Matrix Estimators with Improved Finite Sample Properties", Journal of Econometrics 29, 305-325.

Prucha,I.R. (1984), "On the Estimation of the Variance Covariance Matrix of Maximum Likelihood Estimators in Nonlinear Simultaneous Equation Systems: A Monte Carlo Study". University of Maryland, Department of Economics, Working paper No.84-14.

Rettore,E. e U.Trivellato (1986), "Effetti dei Dati Provvisori sull'Errore di Previsione di Modelli ad Equazioni Simultanee", in "Errori nei Dati Preliminari, Previsioni e Politiche Economiche", a cura di U.Trivellato. Padova: CLEUP, 267-284.

Rothenberg,T.J. (1973), Efficient Estimation with A Priori Information. New Haven: Yale University Press, Cowles Foundation Monograph No.23.

Savin,N.E. (1976), "Conflict Among Testing Procedures in a Linear Regression Model with Autoregressive Disturbances", Econometrica 44, 1303-1315.

Sitzia,B., and M.Tivegna (1975), "Un Modello Aggregato dell'Economia Italiana 1952-1971", in Contributi alla Ricerca Economica No.4. Roma: Banca d'Italia, 195-223.

White,H. (1980), "A Heteroskedasticity-Consistent Covariance Matrix Estimator and a Direct Test for Heteroskedasticity", Econometrica 48, 817-838.

White,H. (1982), "Maximum Likelihood Estimation of Misspecified Models", Econometrica 50, 1-25.

White,H. (1983), "Corrigendum", Econometrica 51, 513.