A New Heteroskedastic Consistent Covariance Matrix Estimator using Deviance Measure

Nuzhat Aftab, Sohail Chand

Abstract


In this article we propose a new heteroskedastic consistent covariance matrix estimator, HC6, based on deviance measure. We have studied and compared the finite sample behavior of the new test and compared it with other this kind of estimators, HC1, HC3 and HC4m, which are used in case of leverage observations. Simulation study is conducted to study the effect of various levels of heteroskedasticity on the size and power of quasi-t test with HC estimators. Results show that the test statistic based on our new suggested estimator has better asymptotic approximation and less size distortion as compared to other estimators for small sample sizes when high level of
heteroskedasticity is present in data.

Keywords


Heteroscedasticity, Covariance Matrix, Deviance

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DOI: http://dx.doi.org/10.18187/pjsor.v12i2.983

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Title

A New Heteroskedastic Consistent Covariance Matrix Estimator using Deviance Measure

Keywords

Heteroscedasticity, Covariance Matrix, Deviance

Description

In this article we propose a new heteroskedastic consistent covariance matrix estimator, HC6, based on deviance measure. We have studied and compared the finite sample behavior of the new test and compared it with other this kind of estimators, HC1, HC3 and HC4m, which are used in case of leverage observations. Simulation study is conducted to study the effect of various levels of heteroskedasticity on the size and power of quasi-t test with HC estimators. Results show that the test statistic based on our new suggested estimator has better asymptotic approximation and less size distortion as compared to other estimators for small sample sizes when high level of
heteroskedasticity is present in data.

Date

2016-06-03

Identifier


Source

Pakistan Journal of Statistics and Operation Research; Vol. 12 No. 2, 2016



Print ISSN: 1816-2711 | Electronic ISSN: 2220-5810