On Theil's Errors

CentER Working Paper No. 2003-18

Posted: 26 May 2004

See all articles by J.R. Magnus

J.R. Magnus

Vrije Universiteit Amsterdam, School of Business and Economics

Ashoke Sinha

Tilburg University - Center for Economic Research (CentER)

Multiple version iconThere are 2 versions of this paper

Date Written: 2003

Abstract

We take a fresh look at Theil's BLUS residuals and ask why they have gone out of fashion. All our simulation experiments indicate that tests based on BLUS residuals have higher power than those based on the more popular recursive residuals, even in those cases (structural breaks) where intuition would favour the recursive residuals.

Keywords: BLUS residuals, Recursive residuals, Power comparisons

JEL Classification: B23, C10, C13, C20

Suggested Citation

Magnus, Jan R. and Sinha, Ashoke, On Theil's Errors (2003). CentER Working Paper No. 2003-18. Available at SSRN: https://ssrn.com/abstract=550162

Jan R. Magnus (Contact Author)

Vrije Universiteit Amsterdam, School of Business and Economics ( email )

De Boelelaan 1105
Amsterdam, 1081HV
Netherlands

Ashoke Sinha

Tilburg University - Center for Economic Research (CentER) ( email )

P.O. Box 90153
Tilburg, 5000 LE
Netherlands

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