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An Edgeworth Test Size Correction for the Linear Model with AR(1) Errors

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  • Magee, Lonnie

Abstract

T. J. Rothenberg's (1984) Edgeworth test size correction for the linear model with a nonscalar covariance matrix is applied to the special case of AR(1) errors. Simulations show that the correction reduces the overrejection that is commonly encountered in this model, although substantial overrejection remains when the original amount is large. When the regressors are autocorrelated and collinear (for example, two trended regressors) there is not nearly as much overrejection when testing a single restriction as there is when the model contains only one autocorrelated regressor. Copyright 1989 by The Econometric Society.

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  • Magee, Lonnie, 1989. "An Edgeworth Test Size Correction for the Linear Model with AR(1) Errors," Econometrica, Econometric Society, vol. 57(3), pages 661-674, May.
  • Handle: RePEc:ecm:emetrp:v:57:y:1989:i:3:p:661-74
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    Cited by:

    1. Magdalinos, Michael A. & Symeonides, Spyridon D., 1995. "Alternative size corrections for some GLS test statistics the case of the AR(1) model," Journal of Econometrics, Elsevier, vol. 66(1-2), pages 35-59.
    2. Preinerstorfer, David & Pötscher, Benedikt M., 2016. "On Size And Power Of Heteroskedasticity And Autocorrelation Robust Tests," Econometric Theory, Cambridge University Press, vol. 32(02), pages 261-358, April.
    3. Rayner, Robert K., 1991. "Resampling methods for tests in regression models with autocorrelated errors," Economics Letters, Elsevier, vol. 36(3), pages 281-284, July.

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