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Size matters: covariance matrix estimation under the alternative


  • Jason Allen


The purpose of this paper is to investigate, using Monte Carlo methods, whether Hall's (2000) centred test of overidentifying restrictions for parameters estimated by generalized method of moments (GMM) is more powerful, once the test is size-adjusted, than the standard test introduced by Hansen (1982). The Monte Carlo evidence shows that very little size-adjusted power is gained over the standard uncentred calculation. Copyright Royal Economic Society 2007

Suggested Citation

  • Jason Allen, 2007. "Size matters: covariance matrix estimation under the alternative," Econometrics Journal, Royal Economic Society, vol. 10(3), pages 637-644, November.
  • Handle: RePEc:ect:emjrnl:v:10:y:2007:i:3:p:637-644

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    References listed on IDEAS

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    More about this item

    JEL classification:

    • C15 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Statistical Simulation Methods: General
    • C52 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Evaluation, Validation, and Selection
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates


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