Heteroscedasticity and Autocorrelation Efficient (HAE) Estimation and Pivots for Jointly Evolving Series
Hrishikesh D. Vinod
Fordham University - Department of Economics
September 17, 2008
Fordham University Department of Economics Discussion Paper No. 2008-15
A new two-way map between time domain and numerical magnitudes or values domain (v-dom) provides a new solution to heteroscedasticity. Since sorted logs of squared fitted residuals are monotonic in the v-dom, we obtain a parsimonious fit there. Two theorems prove consistency, asymptotic normality, efficiency and specification-robustness, supplemented by a simulation. Since Dufour's (1997) impossibility theorems show how confidence intervals from Wald-type tests can have zero coverage, I suggest Godambe pivot functions (GPF) with good finite sample coverage and distribution-free robustness. I use the Frisch-Waugh theorem and the scalar GPF to construct new confidence intervals for regression parameters and apply Vinod's (2004, 2006) maximum entropy bootstrap. I use Irving Fisher's model for interest rates and Keynesian consumption function for illustration.
Number of Pages in PDF File: 43
Keywords: regression, bootstrap, simulation, Fisher equation, Permanent income hypothesis
JEL Classification: C13, C22working papers series
Date posted: September 19, 2008
© 2014 Social Science Electronic Publishing, Inc. All Rights Reserved.
This page was processed by apollo6 in 0.718 seconds