NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Automatic Lag Selection in Covariance Matrix Estimation

Kenneth D. West, Whitney K. Newey

NBER Technical Working Paper No. 144
Issued in February 1995
NBER Program(s):   EFG

We propose a nonparametric method for automatically selecting the number of autocovariances to use in computing a heteroskedasticity and autocorrelation consistent covariance matrix. For a given kernel for weighting the autocovariances, we prove that our procedure is asymptotically equivalent to one that is optimal under a mean squared error loss function. Monte Carlo simulations suggest that our procedure performs tolerably well, although it does result in size distortions.

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Document Object Identifier (DOI): 10.3386/t0144

Published:

  • Review of Economic Studies, 1994, 61, pp 631-653
  • "A Comparison of Alternative Instrumental Variables Estimators of a Dynamic Linear Model," (with David Wilcox) Journal of Business and Economic Statistics 14 (1996), pp. 281-293.

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