On Testing for Diagonality of Large Dimensional Covariance Matrices
Datasets in a variety of disciplines require methods where both the sample size and the dataset dimensionality are allowed to be large. This framework is drastically different from the classical asymptotic framework where the number of observations is allowed to be large but the dimensionality of the dataset remains fixed. This paper proposes a new test of diagonality for large dimensional covariance matrices. The test is based on the work of John (1971) and Ledoit and Wolf (2002) among others. The theoretical properties of the test are discussed. A Monte Carlo study of the small sample properties of the test indicate that it behaves well under the null hypothesis and has superior power properties compared to an existing test of diagonality for large datasets.
|Date of creation:||Oct 2004|
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- Chang, Yoosoon, 2002.
"Nonlinear IV unit root tests in panels with cross-sectional dependency,"
Journal of Econometrics,
Elsevier, vol. 110(2), pages 261-292, October.
- Chang, Yoosoon, 2002. "Nonlinear IV Unit Root Tests in Panels with Cross-Sectional Dependency," Working Papers 2000-08, Rice University, Department of Economics.
- Yoosoon Chang, 2000. "Nonlinear IV Unit Root Tests in Panels with Cross-Sectional Dependency," CIRJE F-Series CIRJE-F-85, CIRJE, Faculty of Economics, University of Tokyo.
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