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Full-Text Articles in Social and Behavioral Sciences
Prewhitening Bias In Hac Estimation, Donggyu Sul, Peter C.B. Phillips, Chi-Young Choi
Prewhitening Bias In Hac Estimation, Donggyu Sul, Peter C.B. Phillips, Chi-Young Choi
Cowles Foundation Discussion Papers
HAC estimation commonly involves the use of prewhitening filters based on simple autoregressive models. In such applications, small sample bias in the estimation of autoregressive coefficients is transmitted to the recoloring filter, leading to HAC variance estimates that can be badly biased. The present paper provides an analysis of these issues using asymptotic expansions and simulations. The approach we recommend involves the use of recursive demeaning procedures that mitigate the effects of small sample autoregressive bias. Moreover, a commonly-used restriction rule on the prewhitening estimates (that first order autoregressive coefficient estimates, or largest eigenvalues, greater than 0.97 be replaced by …
Bias In Dynamic Panel Estimation With Fixed Effects, Incidental Trends And Cross Section Dependence, Peter C.B. Phillips, Donggyu Sul
Bias In Dynamic Panel Estimation With Fixed Effects, Incidental Trends And Cross Section Dependence, Peter C.B. Phillips, Donggyu Sul
Cowles Foundation Discussion Papers
Explicit asymptotic bias formulae are given for dynamic panel regression estimators as the cross section sample size N → ∞. The results extend earlier work by Nickell (1981) and later authors in several directions that are relevant for practical work, including models with unit roots, deterministic trends, predetermined and exogenous regressors, and errors that may be cross sectionally dependent. The asymptotic bias is found to be so large when incidental linear trends are fitted and the time series sample size is small that it changes the sign of the autoregressive coefficient. Another finding of interest is that, when there is …