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Bias of SDE 2 in the Linear Regression Model with Correlated Errors

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  • Kiviet, Jan F
  • Kramer, Walter

Abstract

The authors consider the relative bias of the OLS-based estimate s(squared) of the disturbance variance in the linear regression model when disturbances are stationary AR(1). They improve upon previous bounds for the bias and show that E(s[squared]/["sigma" squared]) tends to zero as autocorrelation increases whenever there is an intercept in the regression. Copyright 1992 by MIT Press.

Suggested Citation

  • Kiviet, Jan F & Kramer, Walter, 1992. "Bias of SDE 2 in the Linear Regression Model with Correlated Errors," The Review of Economics and Statistics, MIT Press, vol. 74(2), pages 362-365, May.
  • Handle: RePEc:tpr:restat:v:74:y:1992:i:2:p:362-65
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    References listed on IDEAS

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    1. Michael Rothschild, 1971. "On the Cost of Adjustment," The Quarterly Journal of Economics, Oxford University Press, vol. 85(4), pages 605-622.
    2. Russell Davidson & Richard Harris, 1981. "Non-Convexities in Continuous Time Investment Theory," Review of Economic Studies, Oxford University Press, vol. 48(2), pages 235-253.
    3. Hamermesh, Daniel S., 1990. "Aggregate employment dynamics and lumpy adjustment costs," Carnegie-Rochester Conference Series on Public Policy, Elsevier, pages 93-129.
    4. Robert F. Engle & Ta-Chung Liu, 1972. "Effects of Aggregation Over Time on Dynamic Characteristics of an Econometric Model," NBER Chapters,in: Econometric Models of Cyclical Behavior, Volumes 1 and 2, pages 673-737 National Bureau of Economic Research, Inc.
    5. Card, David, 1986. "Efficient Contracts with Costly Adjustment: Short-run Employment Determination for Airline Mechanics," American Economic Review, American Economic Association, pages 1045-1071.
    6. Stephen Nickell, 1984. "An Investigation of the Determinants of Manufacturing Employment in the United Kingdom," Review of Economic Studies, Oxford University Press, vol. 51(4), pages 529-557.
    7. Hamermesh, Daniel S., 1990. "Aggregate employment dynamics and lumpy adjustment costs," Carnegie-Rochester Conference Series on Public Policy, Elsevier, pages 93-129.
    8. P. K. Trivedi, 1985. "Distributed Lags, Aggregation and Compounding: Some Econometric Implications," Review of Economic Studies, Oxford University Press, vol. 52(1), pages 19-35.
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    Cited by:

    1. Cella, Michela, 2008. "Informed principal with correlation," Games and Economic Behavior, Elsevier, pages 433-456.
    2. Prof. Dr. Walter Krämer & Dr. Christoph Hanck, "undated". "OLS-based estimation of the disturbance variance under spatial autocorrelation," Working Papers 7, Business and Social Statistics Department, Technische Universität Dortmund, revised Oct 2006.
    3. Richard W. Kopcke, 1993. "The determinants of business investment: has capital spending been surprisingly low?," New England Economic Review, Federal Reserve Bank of Boston, issue Jan, pages 3-31.
    4. Prof. Dr. Walter Krämer & Sebastian Schich, "undated". "Large - scaledisasters and the insurance industry," Working Papers 4, Business and Social Statistics Department, Technische Universität Dortmund, revised Mar 2005.
    5. Martin Browning & Mette Ejrnæs & Javier Alvarez, 2010. "Modelling Income Processes with Lots of Heterogeneity," Review of Economic Studies, Oxford University Press, vol. 77(4), pages 1353-1381.
    6. Gotu, Butte, 1999. "The consistency of s2 in the linear regression model when the disturbances are spatially correlated," Technical Reports 1999,07, Technische Universität Dortmund, Sonderforschungsbereich 475: Komplexitätsreduktion in multivariaten Datenstrukturen.

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