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From | Carolina Lennon <carolina.lennon@gmail.com> |
To | statalist@hsphsun2.harvard.edu |
Subject | Re: st: re: Solving the moving average in the error structure in a |
Date | Mon, 1 Mar 2010 18:23:44 +0100 |
Great Kit, I found the reference. Hansen, L.P., Hodrick, R.J.. "Forward Exchange-Rates As Optimal Predictors of Future Spot Rates - An Econometric-Analysis." Journal of Political Economy 88: 829-853, 1980. Many thanks Carol 2010/3/1 Christopher F Baum <baum@bc.edu> > <> > Carolina said > > > I know that the following question is a little out of scope (since it does > not relate to the stata commands), but just in case it is easy for you to > reply...Do you know where I can find a reference justifying "that there is > no reason for a MA error structure to induce bias in the OLS coefficients"? > It would of great help. Indeed, some referees did not like my overlapping > regressions because of the bias cused by the MA errors in the point > estimates. (My regressions were of the type: xtreg, fe cluster) Therefore, > if I can justify it would be just perfect. > > Any decent econometrics textbook discusses the consequences of violating > the IID error assumption (usually when discussing generalized least squares, > or robust standard errors, etc.) Generally speaking we know that AR(1) > errors do not cause bias in point estimates. Nor do AR(2) errors, or AR(3) > errors, etc. Now a finite MA process, if invertible, can always be expressed > as an infinite-order AR process, so what you have is a OLS model with dummy > variables with errors orthogonal to the regressors (by assumption of > exogeneity). The fact that they can be expressed as a finite-order MA or an > infinite-order AR should not matter. See Hansen and Hodrick's article on why > overlapping data induce MA(j) where j is one less than the degree of > overlap, and the solution being to use Newey-West with j lags. I don't have > the H-H cite handy but have mentioned it not too long ago on this list. > I don't think -xtgls- will help, as I believe it only allows for AR(1) > errors. > Kit > > * > * For searches and help try: > * http://www.stata.com/help.cgi?search > * http://www.stata.com/support/statalist/faq > * http://www.ats.ucla.edu/stat/stata/ > -- Carolina Lennon Mobile in Austria: (43) 06 76 59 24 553 Office at Wiiw in Vienna: (43) 01 533 66 10 86 Institute website: http://www.wiiw.ac.at Personal website: http://carolina.lennon.research.googlepages.com/ * * For searches and help try: * http://www.stata.com/help.cgi?search * http://www.stata.com/support/statalist/faq * http://www.ats.ucla.edu/stat/stata/