Abstract

http://ssrn.com/abstract=2412740
 


 



Theil's BLUS Residuals and R Tools for Testing and Removing Autocorrelation and Heteroscedasticity


Hrishikesh D. Vinod


Fordham University - Department of Economics

March 21, 2014


Abstract:     
Theil (1968) proposed a transformation of regression residuals so that they are best (minimizes the trace of its covariance matrix), linear, unbiased and subject to the constraint that its covariance matrix is scalar (BLUS) in the sense that it is proportional to the identity matrix. Despite their desirable theoretical properties Theil's tests for autocorrelation and heteroscedasticity using BLUS residuals are not much used by researchers, perhaps because of computational difficulties. My R program is checked against Ford (2008), who provides an example with implementations in Eviews and SAS software. Vinod (2010) suggests going beyond testing by making efficient adjustments to overcome the ill effects of non-scalar covariances. Links for R software to implement those tools are provided here near the end of the paper. I hope that my R software will help researchers fill a gap in the literature by studying the size and power of Theil's tests in comparison with other tests in the literature, and begin to focus on simultaneously overcoming these two common problems.

Number of Pages in PDF File: 9

Keywords: Serially correlated errors, scalar covariance, regression

JEL Classification: C20, C15, C88

working papers series





Download This Paper

Date posted: March 23, 2014  

Suggested Citation

Vinod, Hrishikesh D., Theil's BLUS Residuals and R Tools for Testing and Removing Autocorrelation and Heteroscedasticity (March 21, 2014). Available at SSRN: http://ssrn.com/abstract=2412740 or http://dx.doi.org/10.2139/ssrn.2412740

Contact Information

Hrishikesh D. Vinod (Contact Author)
Fordham University - Department of Economics ( email )
Dealy Hall
Bronx, NY 10458
United States
718-817-4065 (Phone)
718-817-3518 (Fax)
Feedback to SSRN


Paper statistics
Abstract Views: 532
Downloads: 162
Download Rank: 111,099

© 2014 Social Science Electronic Publishing, Inc. All Rights Reserved.  FAQ   Terms of Use   Privacy Policy   Copyright   Contact Us
This page was processed by apollo2 in 0.281 seconds