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Unbounded heteroscedasticity in first-order autoregressive models and the Eicker-White asymptotic variance estimator

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  • Kourogenis, Nikolaos
  • Pittis, Nikitas

Abstract

This paper focuses on first-order autoregressive models in which the noise variance increases without bound. Although this specification violates a standard assumption made in the relevant literature, namely that of bounded noise variance, it is proved that the well-known Eicker-White estimator remains a consistent estimator of the asymptotic variance of the OLS estimator.

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Bibliographic Info

Article provided by Elsevier in its journal Economics Letters.

Volume (Year): 106 (2010)
Issue (Month): 2 (February)
Pages: 84-86

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Handle: RePEc:eee:ecolet:v:106:y:2010:i:2:p:84-86

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Web page: http://www.elsevier.com/locate/ecolet

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Keywords: Polynomial-like noise variance Asymptotic variance Order of variance growth Eicker-White variance estimator;

References

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  1. Margaret M. McConnell & Gabriel Perez Quiros, 1997. "Output fluctuations in the United States: what has changed since the early 1980s?," Research Paper 9735, Federal Reserve Bank of New York.
  2. John Y. Campbell, 2001. "Have Individual Stocks Become More Volatile? An Empirical Exploration of Idiosyncratic Risk," Journal of Finance, American Finance Association, vol. 56(1), pages 1-43, 02.
  3. Robinson, P M, 1991. "Automatic Frequency Domain Inference on Semiparametric and Nonparametric Models," Econometrica, Econometric Society, vol. 59(5), pages 1329-63, September.
  4. Andrews, Donald W. K., 1987. "Laws of Large Numbers for Dependent Non-Identically Distributed Random Variables," Working Papers 645, California Institute of Technology, Division of the Humanities and Social Sciences.
  5. Jong, R.M. de & Davidson, J., 1996. "Consistency of Kernel Estimators of Heteroscedastic and Autocorrelated Covariance Matrices," Discussion Paper 1996-52, Tilburg University, Center for Economic Research.
  6. Nicholls, D F & Pagan, A R, 1983. "Heteroscedasticity in Models with Lagged Dependent Variables," Econometrica, Econometric Society, vol. 51(4), pages 1233-42, July.
  7. G. William Schwert, 1990. "Why Does Stock Market Volatility Change Over Time?," NBER Working Papers 2798, National Bureau of Economic Research, Inc.
  8. Andrews, Donald W K, 1991. "Heteroskedasticity and Autocorrelation Consistent Covariance Matrix Estimation," Econometrica, Econometric Society, vol. 59(3), pages 817-58, May.
  9. Hansen, Bruce E, 1992. "Consistent Covariance Matrix Estimation for Dependent Heterogeneous Processes," Econometrica, Econometric Society, vol. 60(4), pages 967-72, July.
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