Robust Covariance Matrix Estimation with Data-Dependent VAR Prewhitening Order /
Haan, Wouter J. den.
Robust Covariance Matrix Estimation with Data-Dependent VAR Prewhitening Order / Wouter J. den Haan, Andrew T. Levin. - Cambridge, Mass. National Bureau of Economic Research 2000. - 1 online resource: illustrations (black and white); - NBER technical working paper series no. t0255 . - Technical Working Paper Series (National Bureau of Economic Research) no. t0255. .
June 2000.
This paper analyzes the performance of heteroskedasticity-and-autocorrelation-consistent (HAC) covariance matrix estimators in which the residuals are prewhitened using a vector autoregressive (VAR) filter. We highlight the pitfalls of using an arbitrarily fixed lag order for the VAR filter, and we demonstrate the benefits of using a model selection criterion (either AIC or BIC) to determine its lag structure. Furthermore, once data-dependent VAR prewhitening has been utilized, we find negligible or even counter-productive effects of applying standard kernel-based methods to the prewhitened residuals; that is, the performance of the prewhitened kernel estimator is virtually indistinguishable from that of the VARHAC estimator.
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Mode of access: World Wide Web.
Robust Covariance Matrix Estimation with Data-Dependent VAR Prewhitening Order / Wouter J. den Haan, Andrew T. Levin. - Cambridge, Mass. National Bureau of Economic Research 2000. - 1 online resource: illustrations (black and white); - NBER technical working paper series no. t0255 . - Technical Working Paper Series (National Bureau of Economic Research) no. t0255. .
June 2000.
This paper analyzes the performance of heteroskedasticity-and-autocorrelation-consistent (HAC) covariance matrix estimators in which the residuals are prewhitened using a vector autoregressive (VAR) filter. We highlight the pitfalls of using an arbitrarily fixed lag order for the VAR filter, and we demonstrate the benefits of using a model selection criterion (either AIC or BIC) to determine its lag structure. Furthermore, once data-dependent VAR prewhitening has been utilized, we find negligible or even counter-productive effects of applying standard kernel-based methods to the prewhitened residuals; that is, the performance of the prewhitened kernel estimator is virtually indistinguishable from that of the VARHAC estimator.
System requirements: Adobe [Acrobat] Reader required for PDF files.
Mode of access: World Wide Web.