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More efficient tests robust to heteroskedasticity of unknown form

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  • Emmanuel Flachaire

    (EUREQUA - Equipe Universitaire de Recherche en Economie Quantitative - UP1 - Université Paris 1 Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique)

Abstract

In the presence of heteroskedasticity of unknown form, the Ordinary Least Squares parameter estimator becomes inefficient and its covariance matrix estimator inconsistent. Eicker (1963) and White (1980) were the first to propose a robust consistent covariance matrix estimator, that permits asymptotically correct inference. This estimator is widely used in practice. % Cragg (1983) proposed a more efficient estimator, but concluded thattests based on it are unreliable. Thus, this last estimator has not been used in practice. This paper is concerned with finite sample properties of tests robust to heteroskedasticity of unknown form. Our results suggestthat reliable and more efficient tests can be obtained with the Cragg estimators in small samples.

Suggested Citation

  • Emmanuel Flachaire, 2005. "More efficient tests robust to heteroskedasticity of unknown form," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) halshs-00175914, HAL.
    • Handle: RePEc:hal:cesptp:halshs-00175914
    DOI: 10.1081/ETC-200067942
    Note: View the original document on HAL open archive server: https://shs.hal.science/halshs-00175914
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    References listed on IDEAS

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    2. Pötscher, Benedikt M. & Preinerstorfer, David, 2023. "How Reliable Are Bootstrap-Based Heteroskedasticity Robust Tests?," Econometric Theory, Cambridge University Press, vol. 39(4), pages 789-847, August.
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    4. Pötscher, Benedikt M. & Preinerstorfer, David, 2021. "Valid Heteroskedasticity Robust Testing," MPRA Paper 117855, University Library of Munich, Germany, revised Jul 2023.
    5. Torben Klarl, 2014. "Is Spatial Bootstrapping A Panacea For Valid Inference?," Journal of Regional Science, Wiley Blackwell, vol. 54(2), pages 304-312, March.
    6. Eric S. Lin & Ta-Sheng Chou, 2018. "Finite-sample refinement of GMM approach to nonlinear models under heteroskedasticity of unknown form," Econometric Reviews, Taylor & Francis Journals, vol. 37(1), pages 1-28, January.
    7. Chen Cao & Xueyun Chen, 2021. "Can Industrial Integration Improve the Sustainability of Grain Security?," Sustainability, MDPI, vol. 13(24), pages 1-17, December.
    8. Trindade, F. & Fulginiti, L. & Perrin, R., 2018. "Irrigation and Climate Effects on Land Productivity in the U.S. Central Plains," 2018 Conference, July 28-August 2, 2018, Vancouver, British Columbia 277264, International Association of Agricultural Economists.

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