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Automatic positive semi-definite HAC covariance matrix and GMM estimation

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Author Info
Richard Smith () (Institute for Fiscal Studies and University of Cambridge)

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Abstract

This paper proposes a new class of HAC covariance matrix estimators. The standard HAC estimation method re-weights estimators of the autocovariances. Here we initially smooth the data observations themselves using kernel function based weights. The resultant HAC covariance matrix estimator is the normalised outer product of the smoothed random vectors and is therefore automatically positive semi-definite. A corresponding efficient GMM criterion may also be defined as a quadratic form in the smoothed moment indicators whose normalised minimand provides a test statistic for the over-identifying moment conditions.

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File URL: http://cemmap.ifs.org.uk/wps/cwp0417.pdf
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Publisher Info
Paper provided by Centre for Microdata Methods and Practice, Institute for Fiscal Studies in its series CeMMAP working papers with number CWP17/04.

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Length: 19 pp.
Date of creation: Dec 2004
Date of revision:
Handle: RePEc:ifs:cemmap:17/04

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Postal: The Institute for Fiscal Studies 7 Ridgmount Street LONDON WC1E 7AE
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Postal: The Institute for Fiscal Studies 7 Ridgmount Street LONDON WC1E 7AE
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Related research
Keywords: GMM; HAC Covariance Matrix Estimation; Overidentifying Moments;

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Find related papers by JEL classification:
C13 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: General - - - Estimation
C30 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - General

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Newey, Whitney K & West, Kenneth D, 1987. "A Simple, Positive Semi-definite, Heteroskedasticity and Autocorrelation Consistent Covariance Matrix," Econometrica, Econometric Society, vol. 55(3), pages 703-08, May. [Downloadable!] (restricted)
    Other versions:
  2. Hansen, Lars Peter & Heaton, John & Yaron, Amir, 1996. "Finite-Sample Properties of Some Alternative GMM Estimators," Journal of Business & Economic Statistics, American Statistical Association, vol. 14(3), pages 262-80, July.
  3. Andrews, Donald W K, 1991. "Heteroskedasticity and Autocorrelation Consistent Covariance Matrix Estimation," Econometrica, Econometric Society, vol. 59(3), pages 817-58, May. [Downloadable!] (restricted)
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  4. Hansen, Lars Peter, 1982. "Large Sample Properties of Generalized Method of Moments Estimators," Econometrica, Econometric Society, vol. 50(4), pages 1029-54, July. [Downloadable!] (restricted)
  5. Smith, Richard J, 1997. "Alternative Semi-parametric Likelihood Approaches to Generalised Method of Moments Estimation," Economic Journal, Royal Economic Society, vol. 107(441), pages 503-19, March. [Downloadable!] (restricted)
  6. K. Newey, Whitney, 1985. "Generalized method of moments specification testing," Journal of Econometrics, Elsevier, vol. 29(3), pages 229-256, September. [Downloadable!] (restricted)
  7. Nicholas M. Kiefer & Timothy J. Vogelsang & Helle Bunzel, 2000. "Simple Robust Testing of Regression Hypotheses," Econometrica, Econometric Society, vol. 68(3), pages 695-714, May.
  8. Andrews, Donald W K & Monahan, J Christopher, 1992. "An Improved Heteroskedasticity and Autocorrelation Consistent Covariance Matrix Estimator," Econometrica, Econometric Society, vol. 60(4), pages 953-66, July. [Downloadable!] (restricted)
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  9. Jansson, Michael, 2002. "Consistent Covariance Matrix Estimation For Linear Processes," Econometric Theory, Cambridge University Press, vol. 18(06), pages 1449-1459, December. [Downloadable!]
  10. Peter C. B. Phillips & Yixiao Sun & Sainan Jin, 2003. "Consistent HAC Estimation and Robust Regression Testing Using Sharp Origin Kernels with No Truncation," University of California at San Diego, Economics Working Paper Series 2003-05, Department of Economics, UC San Diego. [Downloadable!]
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  11. Newey, Whitney K & West, Kenneth D, 1987. "Hypothesis Testing with Efficient Method of Moments Estimation," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 28(3), pages 777-87, October. [Downloadable!] (restricted)
  12. Newey, Whitney K. & McFadden, Daniel, 1986. "Large sample estimation and hypothesis testing," Handbook of Econometrics, in: R. F. Engle & D. McFadden (ed.), Handbook of Econometrics, edition 1, volume 4, chapter 36, pages 2111-2245 Elsevier. [Downloadable!] (restricted)
  13. Yuichi Kitamura & Michael Stutzer, 1997. "An Information-Theoretic Alternative to Generalized Method of Moments Estimation," Econometrica, Econometric Society, vol. 65(4), pages 861-874, July.
  14. Bierens, Herman J., 1997. "Nonparametric cointegration analysis," Journal of Econometrics, Elsevier, vol. 77(2), pages 379-404, April. [Downloadable!] (restricted)
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  15. Richard Smith, 2004. "GEL Criteria for Moment Condition Models," CeMMAP working papers CWP19/04, Centre for Microdata Methods and Practice, Institute for Fiscal Studies. [Downloadable!]
Full references

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Richard Smith, 2004. "GEL Criteria for Moment Condition Models," CeMMAP working papers CWP19/04, Centre for Microdata Methods and Practice, Institute for Fiscal Studies. [Downloadable!]
  2. Stanislav Anatolyev, 2005. "Optimal Instruments in Time Series: A Survey," Working Papers w0069, Center for Economic and Financial Research (CEFIR). [Downloadable!]
    Other versions:
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