What is Newey-West standard error?
Newey-West standard error method is a robust method/estimator which is very accurate when there is presence of heteroskedasticity and autocorrelation. Also, when in the panel model there is a lagged value of an indicator then this method is very consistent.
How does the Newey-West estimator work?
The Newey–West variance estimator handles autocorrelation up to and including a lag of m, where m is specified by stipulating the lag() option. Thus, it assumes that any autocorrelation at lags greater than m can be ignored.
What is Xtscc Stata?
Description. xtscc produces Driscoll and Kraay (1998) standard errors for coefficients estimated by pooled OLS/WLS or fixed-effects (within) regression. depvar is the dependent variable and varlist is an (optional) list of explanatory variables.
What is Bartlett kernel?
The Newey-West estimator. uses the Bartlett kernel, which is a q = 1 kernel, meaning that 1 is the largest value of q for which. the quantity, k(q)(0) = limt→0 |t|−q(1 − k(t)), is finite. This raises the apparently uninvestigated. question of whether the Bartlett kernel is optimal among q = 1 kernels.
What is prais winsten regression?
Description. The Prais-Winsten estimator takes into account AR(1) serial correlation of the errors in a linear regression model. The procedure recursively estimates the coefficients and the error autocorrelation of the specified model until sufficient convergence of the AR(1) coefficient is reached.
What is White test for heteroskedasticity?
What is the White Test? White’s test is used to test for heteroscedastic (“differently dispersed”) errors in regression analysis. It is a special case of the (simpler) Breusch-Pagan test. A graph showing heteroscedasticity; the White test is used to identify heteroscedastic errors in regression analysis.
What does Durbin Watson tell us?
The Durbin Watson (DW) statistic is a test for autocorrelation in the residuals from a statistical model or regression analysis. The Durbin-Watson statistic will always have a value ranging between 0 and 4. A value of 2.0 indicates there is no autocorrelation detected in the sample.
What is cross sectional dependence?
Panel data can be subject to pervasive cross-sectional dependence, whereby all units in the same cross-section are correlated. This is usually attributed to the effect of some unobserved common factors, common to all units and affecting each of them, although possibly in different ways.
What is the difference between the Cochrane Orcutt procedure and the prais winsten procedure?
Whereas the Cochrane–Orcutt method uses a lag definition and loses the first observation in the iterative method, the Prais–Winsten method preserves that first observation.
How is heteroscedasticity measured?
To check for heteroscedasticity, you need to assess the residuals by fitted value plots specifically. Typically, the telltale pattern for heteroscedasticity is that as the fitted values increases, the variance of the residuals also increases.
How do you use Newey West in Stata?
In Stata, the command newey produces Newey–West standard errors for coefficients estimated by OLS regression. In MATLAB, the command hac in the Econometrics toolbox produces the Newey–West estimator (among others). In Python, the statsmodels module includes functions for the covariance matrix using Newey-West.
Where can I find the Newey-West corrected standard error?
In SAS, the Newey-West corrected standard errors can be obtained in PROC AUTOREG and PROC MODEL ^ “Newey West estimator – Quantitative Finance Collector”. Archived from the original on 2018-06-24.
What is the Newey West variance estimator?
The Newey–West (1987) variance estimator is an extension that produces consistent estimates when there is autocorrelation in addition to possible heteroskedasticity. The Newey–West variance estimator handles autocorrelation up to and including a lag of m, where m is specified by stipulating the lag() option.
Where can I find the Newey-West estimator in R?
In R, the packages sandwich and plm include a function for the Newey–West estimator. In Stata, the command newey produces Newey–West standard errors for coefficients estimated by OLS regression. In MATLAB, the command hac in the Econometrics toolbox produces the Newey–West estimator (among others).