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?
Is the optimal lag length for the Hansen and Hodrick and Newey West robust standard errors the same?
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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).
answered Apr 29, 2019 at 13:14