Improved HAC Covariance Matrix Estimation Based on Forecast Errors

Chung-Ming Kuan () and Yu-Wei Hsieh ()

No 06-A008, IEAS Working Paper : academic research from Institute of Economics, Academia Sinica, Taipei, Taiwan

Abstract: We propose computing HAC covariance matrix estimators based on one-stepahead forecasting errors. It is shown that this estimator is consistent and has smaller bias than other HAC estimators. Moreover, the tests that rely on this estimator have more accurate sizes without sacrificing its power.

Keywords: forecast error; HAC estimator; kernel estimator; recursive residual; robust test (search for similar items in EconPapers)
JEL-codes: C12 C22 (search for similar items in EconPapers)
Pages: 8 pages
Date: 2006-09
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Journal Article: Improved HAC covariance matrix estimation based on forecast errors (2008)
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