In this paper, we examine the robust Wald test statistic for SUR systems with adding up restrictions where the same explanatory variables are present in all equations and where heteroskedasticity and/or autocorrelation of unknown forms may be present. For this case, the coefficients are usually estimated by least squares, equation by equation. For testing the typical hypotheses of interest, we show that the robust Wald statistic, i.e., the statistic based on the heteroskedasticity and autocorrelation consistent covariance matrix estimator, is invariant to the equation deleted. Our proof of invariance is algebraic and does not rely on parametric assumptions or on the knowledge of the covariance matrix of disturbances. Furthermore, the adding-up restrictions we consider are of a general form: the weighted sum of the dependent variables adds up to one of the explanatory variables, not necessarily a constant. We illustrate our results using the Capital Asset Pricing Model.
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Paper provided by University of Iowa, Department of Economics in its series Working Papers with number
98-01.
Length: 22 pages Date of creation: Jan 1998 Date of revision: Handle: RePEc:uia:iowaec:98-01
Contact details of provider: Postal: University of Iowa, Department of Economics, Henry B. Tippie College of Business, Iowa City, Iowa 52242 Phone: (319) 335-0829 Fax: (319) 335-1956 Web page: http://tippie.uiowa.edu/economics/ More information through EDIRC
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Find related papers by JEL classification: C1 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: General
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.:
Ravi Jagnnathan & Ellen R. McGrattan, 1995.
"The CAPM debate,"
Quarterly Review,
Federal Reserve Bank of Minneapolis, issue Fall, pages 2-17.
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