0
$\begingroup$

Is the optimal lag length for the Hansen and Hodrick and Newey West robust standard errors the same?

I have read in Greene that the optimal is $T^{1/4}$ for Newey-West, is this the same for Hansen and Hodrick?

$\endgroup$
1
$\begingroup$

No, the optimal lag length is not the same and it is not as simple as $\lfloor T^{1/4} \rfloor$. There are various data-driven lag/bandwidth selection techniques with Andrews (1991, Econometrica, 59, 817-859) and Newey & West (1994, Review of Economic Studies, 61, 631-653) being particularly prominent. (Plus the literature on bandwidth=sample size literature.)

See also this questions and corresponding answer for a more detailed Comparison between Newey-West (1987) and Hansen-Hodrick (1980).

$\endgroup$

Your Answer

By clicking “Post Your Answer”, you agree to our terms of service, privacy policy and cookie policy

Not the answer you're looking for? Browse other questions tagged or ask your own question.