Automatic positive semi-definite HAC covariance matrix and GMM estimation

Richard Smith

No 17/04, CeMMAP working papers from Institute for Fiscal Studies

Abstract: This paper proposes a new class of HAC covariance matrix estimators. The standard HAC estimation method re-weights estimators of the autocovariances. Here we initially smooth the data observations themselves using kernel function based weights. The resultant HAC covariance matrix estimator is the normalised outer product of the smoothed random vectors and is therefore automatically positive semi-definite. A corresponding efficient GMM criterion may also be defined as a quadratic form in the smoothed moment indicators whose normalised minimand provides a test statistic for the over-identifying moment conditions.

Date: 2004-12-14
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Persistent link: https://EconPapers.repec.org/RePEc:azt:cemmap:17/04

DOI: 10.1920/wp.cem.2004.1704

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