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A Two-Stage Plug-In Bandwidth Selection And Its Implementation For Covariance Estimation

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  • Hirukawa, Masayuki

Abstract

The two most popular bandwidth choice rules for kernel HAC estimation have been proposed by Andrews (1991) and Newey and West (1994). This paper suggests an alternative approach that estimates an unknown quantity in the optimal bandwidth for the HAC estimator (called normalized curvature ) using a general class of kernels, and derives the optimal bandwidth that minimizes the asymptotic mean squared error of the estimator of normalized curvature. It is shown that the optimal bandwidth for the kernel-smoothed normalized curvature estimator should diverge at a slower rate than that of the HAC estimator using the same kernel. An implementation method of the optimal bandwidth for the HAC estimator, which is analogous to the one for probability density estimation by Sheather and Jones (1991), is also developed. The finite sample performance of the new bandwidth choice rule is assessed through Monte Carlo simulations.

Suggested Citation

  • Hirukawa, Masayuki, 2010. "A Two-Stage Plug-In Bandwidth Selection And Its Implementation For Covariance Estimation," Econometric Theory, Cambridge University Press, vol. 26(03), pages 710-743, June.
  • Handle: RePEc:cup:etheor:v:26:y:2010:i:03:p:710-743_99
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    Cited by:

    1. Hirukawa, Masayuki, 2011. "How useful is yet another data-driven bandwidth in long-run variance estimation?: A simulation study on cointegrating regressions," Economics Letters, Elsevier, vol. 111(2), pages 170-172, May.
    2. repec:bla:jtsera:v:38:y:2017:i:4:p:591-609 is not listed on IDEAS
    3. repec:bla:scjsta:v:44:y:2017:i:4:p:866-898 is not listed on IDEAS
    4. Qunyong Wang & Na Wu, 2012. "Long-run covariance and its applications in cointegration regression," Stata Journal, StataCorp LP, vol. 12(3), pages 525-542, September.

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