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- Title
OPTIMAL BANDWIDTH SELECTION IN HETEROSKEDASTICITY-AUTOCORRELATION ROBUST TESTING.
- Authors
Yixiao Sun; Phillips, Peter C. B.; Sainan Jin
- Abstract
This paper considers studentized tests in time series regressions with nonparametrically autocorrelated errors. The studentization is based on robust standard errors with truncation lag M = bT for some constant b ∈ (0, 1] and sample size T. It is shown that the nonstandard fixed-b limit distributions of such nonparametrically studentized tests provide more accurate approximations to the finite sample distributions than the standard small-b limit distribution. We further show that, for typical economic time series, the optimal bandwidth that minimizes a weighted average of type I and type II errors is larger by an order of magnitude than the bandwidth that minimizes the asymptotic mean squared error of the corresponding long-run variance estimator. A plug-in procedure for implementing this optimal bandwidth is suggested and simulations (not reported here) confirm that the new plug-in procedure works well in finite samples.
- Subjects
BANDWIDTHS; ERRORS; STATISTICAL sampling; ESTIMATION theory; FORECASTING; CONFIDENCE intervals; TIME series analysis
- Publication
Econometrica, 2008, Vol 76, Issue 1, p175
- ISSN
0012-9682
- Publication type
Article
- DOI
10.1111/j.0012-9682.2008.00822.x