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RMSE Reduction for GMM Estimators of Linear Time Series Models

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  • Guido Kuersteiner

    (Massachusetts Institute of Technology)

Abstract

In this paper we analyze GMM estimators for time series models as advocated by Hayashi and Sims, and Hansen and Singleton. It is well known that these estimators achieve efficiency bounds if the number of lagged observations in the instrument set goes to infinity. A new version of the GMM estimator based on kernel weighted moment conditions is proposed. Higher order asymptotic expansions are used to obtain optimal rates of expansions for the number of instruments to minimize the asymptotic MSE of the estimator. Estimates of optimal bandwidth parameters are then used to construct a fully feasible GMM estimator where the number of lagged instruments are endogenously determined by the data. Expressions for the asymptotic bias of kernel weighted GMM estimators are obtained. It is shown that standard GMM procedures have larger asymptotic biases than kernel weighted GMM. A bias correction for the estimator is proposed. It is shown that the bias corrected version achieves a faster rate of convergence of the higher order terms of the MSE than the uncorrected estimator.

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Bibliographic Info

Paper provided by Econometric Society in its series Econometric Society World Congress 2000 Contributed Papers with number 0892.

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Date of creation: 01 Aug 2000
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Handle: RePEc:ecm:wc2000:0892

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Cited by:
  1. Xu Cheng & Zhipeng Liao, 2012. "Select the Valid and Relevant Moments: A One-Step Procedure for GMM with Many Moments," PIER Working Paper Archive 12-045, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania.
  2. Nour Meddahi, 2002. "ARMA Representation of Integrated and Realized Variances," CIRANO Working Papers 2002s-93, CIRANO.
  3. Mahmoud El-Gamal, 2001. "A Bayesian Interpretation Of Multiple Point Estimates," Econometric Reviews, Taylor & Francis Journals, vol. 20(2), pages 235-245.
  4. Hahn, Jinyong & Hausman, Jerry & Kuersteiner, Guido, 2007. "Long difference instrumental variables estimation for dynamic panel models with fixed effects," Journal of Econometrics, Elsevier, vol. 140(2), pages 574-617, October.

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