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st: RE: ivreg2 bandwidth
From
"Schaffer, Mark E" <[email protected]>
To
<[email protected]>
Subject
st: RE: ivreg2 bandwidth
Date
Thu, 13 Oct 2011 16:51:25 +0100
Mirko,
It depends partly on what you think the source of autocorrelation is.
If the autocorrelation is purely the result of the fact that these are 3-day MAs - so that the autocorrelation will disappear after 3 days - then the right kernel to use is the truncated kernel (a.k.a. "Hansen-Hodrick") with a bandwidth of 3. It's not guaranteed to be PD in finite samples, but this might not be a problem in practice in your case.
If you suspect that there is autocorrelation beyond the 3rd lag, you could try the automatic bandwidth selection option - just say bw(auto).
HTH,
Mark
> -----Original Message-----
> From: [email protected]
> [mailto:[email protected]] On Behalf Of Mirko
> Sent: 13 October 2011 15:21
> To: [email protected]
> Subject: st: ivreg2 bandwidth
>
> Dear all,
>
> I am estimating a times-series equation where the dependent
> variable and the endogenous variable are 3-day moving averages.
>
> I am using -ivreg2- with -gmm2s- and -robust- to obtain
> heteroskedasticity and autocorrelation-robust standard errors such as
> this:
>
> qui count
> local band = round(r(N)^1/3)
> ivreg2 y x1 (x2= z1 z2), gmm2s robust bw(`band') first
>
> I am not sure about the correct bandwidth specification in
> this specific case as I am using moving averages. For a
> Bartlett kernel function, it is usually suggested to use
> N^1/3. However, I am not sure whether this is correct
> specification when using moving averages.
>
> I would be grateful to receive any suggestion.
>
> Best wishes,
> Mirko
> --
> Mirko Moro
> Lecturer in Economics
> Economics Division
> University of Stirling
> FK94LA
> Scotland (UK)
> t: +44(0)1786467479
> f: +44(0)1786467469
> e: [email protected]
>
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