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Questions tagged [neweywest]

A type of the coefficient variance-covariance matrix estimator used to compute robust standard errors in time series context. Please consider using the more general *robust-standard-error* tag instead of this.

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HAC Standard Errors - Number of Lags in an Unbalanced Panel

I am working on a panel dataset with a lot of missing data. Because I have reason to believe that the error terms are autocorrelated, I want to use HAC (Newey West) standard errors. I am unsure how to ...
umbal's user avatar
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How to Implement Newey-West covariance matrix properly for MDE estimation

I am trying to implement the MDE method for GARCH given by Baillie and Chung '01 (Estimation of GARCH Models from the Autocorrelations of the Squares of a Process, Jrl. of Time Series Analysis) but I ...
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Derivation of Newey West Formula for Estimating the HAC Covariance Matrix

I currently reading Whitney Newey and Kenneth West's paper "a simple, positive semidefinite, heteroskedasticity and autocorrelation consistent covariance matrix" For a multi-regression ...
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What is the benefit of using Newey-West when there is no impact on the coefficient estimates in OLS?

Since my residuals failed the test for heteroscedasticity and autocorrelation, what is the benefit of using Newey-West when there is no impact on the coefficient estimates in OLS? Does the Newey-West ...
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Neweywest test in R

Portfolio analysis is being conducted using R. We use the neweywest function belonging to the sandwich package, and the brief description is as follows. ...
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Poisson regression with autocorrelated residuals

i am running a Poisson segmented regression on monthly cases following the classic format by Wagner: Wagner AK, Soumerai SB, Zhang F, Ross-Degnan D. Segmented regression analysis of interrupted time ...
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Which standard errors do I use for the Fama-French three-factor model?

I am doing a linear regression with the Fama-French three-factor model with data from the stock market I built a portfolio out of. (I also use Betting Against Beta, Short Term, Long Term and Momentum ...
OneNewBee's user avatar
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Estimate HAC Covariance Matrix from data by hand - Newey West

Given $T$ realizations for $N$ random variables, $X\in\mathbb{R}^{N\times T}$, I want to estimate the covariance matrix of the data, $\Omega\in\mathbb{R}^{N\times N}$. The sample covariance would be $$...
Alex's user avatar
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Understanding Newey West corrections and t-values

I am trying to find if the Japanese market is predictable, using different market valuation variables as independent variables. I use OLS regressions on a time series, because this is done so in ...
Conway's user avatar
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Decision between vcovPC and vcovPL (sandwich)

I want to do a linear probability model with clustered errors. The data also has a panel structure. In the R package “sandwich,” there are two functions: vcovPC() ...
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Unable to match numerical output of Newey-West standard error in statsmodel

I'm trying to implement Newey-West from scratch to better understand each component. Currently having trouble replicating a basic numerical example of Newey-West with lag=1 from ...
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Statistical significance with Newey–West standard errors with a one-lag correction used

I am trying to do statistical test to prove that the returns of a certain equity are statistically significant so that I can reject the null hypothesis that the mean (of returns) is equal to 0. I have ...
MariaMadalina's user avatar
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How are clustered standard errors and Newey-West errors related

As the question says, how are the two concepts related? As far as I understand, both approaches correct for heteroscedasticity and autocorrelation. Yet, they are different. Would applying one of the ...
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Why different regression result with real and excess return as the dependent variable?

I want to test how granted patent, R&D & their ratio predicts real & excess market return. I am doing 2 robust linear regressions: \begin{align} \text{Real Return} \left( t + 1 \right) =...
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How to decide maximum lags length in Newey West T stats [duplicate]

wI have a time series data. I run Newey-West statistics on it without mentioning lag length. It accepts null hypothesis. On the same time series when I mention max.length=50. It rejected null ...
simar's user avatar
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Regarding t test (comparing investment strategies)

I have two time series. These series consists of monthly returns of two investment strategies. I want to test that whether second investment strategy significantly perform better than first one. For ...
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Applying Newey-West variance estimator without a regression framework

Let's say I have a series of correlated variables $x_1, ..., x_T$. I could estimate its variance by $\sigma^2 = \frac{1}{T-1}\sum_{i=1}^T (x_i - \bar{x})^2$. However, as there is serial correlation in ...
CarrySlee's user avatar
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My standard errors are smaller when I use Newey-West? HELP!

I am looking at some time series regressions, When I use OLS, my standard errors on one of the coefficients is 0.002777409. When I use the Newey-West correction the standard errors are smaller: <...
Francis Origi's user avatar
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Is the optimal lag length for the Hansen and Hodrick and Newey West robust standard errors the same?

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 ...
S30609's user avatar
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Diebold-Mariano Test (Newey–West adjusted)

I've two questions regarding to the Diebold-Mariano test in comparing predictive acuraccy. I am reading this paper here. Differences in MSPE are reported together with p-values from the Diebold– ...
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R - Testing for Granger causality when OLS assumption are violated

I am using the vars package to estimate a VAR-model. Since it seems, that the residuals of my model are neither homoscedastic or uncorrelated I computed Newey West ...
Aushilfsgott's user avatar
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Error trying to calculate Newey West Standard Errors for a VAR-model in R [closed]

I estimated a VAR-model in R using the vars package and want to estimate Newey West Standard Errors using the sandwich package <...
Aushilfsgott's user avatar
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Bartlett Kernel (Newey West Covariance Matrix)

Referring to Pesaran (2015) the NW covariance matrix is computed according to the following formula: $$\hat V(\hat\beta)=\frac{1}{T}Q_T^{-1}\hat S_TQ_T^{-1}$$ (Skipping the definition of Q) $$\hat ...
shenflow's user avatar
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Newey West estimator, application

What is the application of the Newey-West estimator of variance in case that we have the presence of autocorrelation in our model?
Maja's user avatar
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ARIMA OLS regression with Newey West standard errors in R

In R I am trying to run an ARIMA model rsi_model_2 <- arima(dlog_seasonal_RSI_ts, order=c(0,0,1), seasonal=c(0,0,1)) How do I make sure it uses Newey-West ...
eBopBob's user avatar
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17 votes
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Comparison between Newey-West (1987) and Hansen-Hodrick (1980)

Question: What are the main differences and similarities between using Newey-West (1987) and Hansen-Hodrick (1980) standard errors? In which situations should one of these be preferred over the other? ...
Candamir's user avatar
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4 votes
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Replicating White's standard errors in R with the NeweyWest function

Theoretical background: White's heteroskedasticity-consistent (HC) standard errors and Newey-West's heteroskedasticity- and autocorrelation-consistent (HAC) standard errors are closely related. When ...
Candamir's user avatar
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946 views

Different optimal bandwidths of Newey West (1994) in R and STATA

R and STATA gave very different optimal bandwidths for the same data set. It will be greatly appreciated if someone can give me any hint why this happens. Here are two sample codes from R and STATA ...
Double E's user avatar
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Heteroscedasticity in VAR Residuals

I got some heteroscedasticity in the residuals of a VAR model (check the plot). As fas as I know, the VAR coefficients are still consistent. However, the standard errors are supposed to be not well ...
Filippo Scopel's user avatar
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1 answer
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Optimal Lag for Newey West

I am currently working on my PhD thesis and was wondering how I can identify the optimal number of lags for the Newey West covariance matrix. So far, my code is ...
user144267's user avatar
2 votes
1 answer
17k views

OLS regression with Newey-West error term [closed]

I need to estimate a linear regression with the OLS method. Since I assume the error terms to be correlated, I would like to account for heteroskedasticity and autocorrelation in the error terms. I ...
user144267's user avatar
4 votes
1 answer
6k views

Does Newey-West standard errors affects the significance level of R2?

General question: I use the linear regressions with the OLS method to check whether cross-sectional standard deviation is able to describe future sumed excess returns or not. Because of ...
Bruno's user avatar
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Newey-West like HAC estimates with non-temporal correlation structure in residuals

Let's suppose I have data with key variables country, company and year (and a load of model variables). There are many companies per country and many years of observations per company. Naturally, ...
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Newey West Covariance in SAS and in R are different

I am using the proc autoreg procedure in SAS and the sandwich library in R to calculate Newey West covariance for a linear model....
Ye Tian's user avatar
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8 votes
1 answer
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Formula for Newey West Standard Error

Could someone please help with the formula for the Newey West standard error of $\beta_1$ (without matrix notation) for the following regression: $Y_t=\beta_0+\beta_1X_t+\epsilon_t$ where $\...
ts_highbury's user avatar
2 votes
1 answer
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Diebold-Mariano test: robust standard errors for 1-day ahead forecasts?

Diebold & Mariano suggest using Newey-West standard errors to correct for autocorrelation and heteroscedasticity in the error terms when comparing forecast accuracy. However, if I understand ...
Pedestrian's user avatar
2 votes
0 answers
208 views

How does Newey West affect inference?

I understand that the Newey-West estimator is an approach to estimate the covariance of the linear regression estimator (OLS) when there are heteroskedasticity and autocorrelation. Should it modify ...
Ye Tian's user avatar
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1 vote
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510 views

Correction for non-normal residuals where residuals are not correlated or show heteroskedasticity

I know the implication of non-normal residuals is uncertain statistical tests because the SEs are inefficient. Can I apply the Newey-West to calculate standardized Standard Errors for an OLS ...
david_i's user avatar
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4 votes
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How to determine the appropriate number of lags when using Newey-West (or HAC) standard errors

I have an unbalanced panel dataset where both autocorrelation and heteroskedasticity are present. I have read, in the Stata manual, that the newey command (see Newey-West, 1987) is one way in which ...
C. Bass's user avatar
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5 votes
1 answer
2k views

Newey-West standard errors when Durbin-Watson test results are fine

I am running a time-series regression. The Durbin-Watson statistics is very close to 2. In such a situation, would it still be better to use Newey-West standard errors, or is it ok to use OLS standard ...
financial theory's user avatar
2 votes
1 answer
1k views

Newey West standard errors in regression model without constant

I'm estimating $y_i= \beta_1 \times x_{1i} + \varepsilon_i$ on a time series on $y$ and $x$, so in presence of heteroskedasticity and autocorrelation. My model does not include any intercepts. Are ...
Giorgio Spedicato's user avatar
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1 answer
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Robust OLS standard errors (Newey-West)

I am running a simple OLS regression with HAC adjustment (i.e. Heteroschedasticity and Autocorrelation adjustment) using the following function in hac() in matlab. ...
Mayou's user avatar
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3 votes
2 answers
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Newey-West standard errors in OLS

I am trying to compute robust coefficient estimates for OLS, using the hac() function in MATLAB (see description of function in MathWorks). In my case, I am ...
Mayou's user avatar
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1 vote
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Finding the amount of error with a multiple regression formula that is determining stock returns

I'm brand new to statistics and I'm using C# and Math.Net to perform multiple regression on a formula with 3 inputs and 1 output. I was told that finding an rsquared value isn't recommended for a ...
DarthVegan's user avatar
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0 answers
438 views

Prediction interval using predict and NeweyWest in R

I have a basic linear regression model I fitted to a time series. Unfortunately I have to account for autocorrelation and heteroskedasicity in the model and I have done so with the NeweyWest function ...
BernieB's user avatar
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5 votes
0 answers
7k views

How to compute Newey West standard errors and t-statistics [closed]

I'm currently trying to use Newey-West standard errors accounting for Heteroskedasticity and Autocorrelation with the sandwich package in R, but i lack understanding as i can not fully grasp the ...
Gritti's user avatar
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2 votes
1 answer
884 views

Probability as a dependent variable in a time-series regression

Are there any issues to run a Newey-West time-series regression on a dependent variable that is a probability? What are the biases that I am facing? I can't find anything online that can help me out ...
CharlesM's user avatar
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Shrinkage Estimator for Newey-West Covariance Matrix

This is a cross post. I would like to apply the Newey-West covariance estimator for portfolio optmization. Up to lag one it is given by $$ \Sigma = \Sigma(0) + \frac12 \left (\Sigma(1) + \Sigma(1)^T \...
Richi W's user avatar
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11 votes
2 answers
14k views

Newey-West t-statistics

I have a time-series which is autocorrelated by construction, and might be heteroscedastic. I have calculated the sample mean of this time-series, and would like to calculate the t-statistic ...
lodhb's user avatar
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2 votes
1 answer
3k views

Newey-West standard errors with cross-sectional OLS?

Consider the cross sectional: $Y_i = a + b X_i + e_i$ where I have reason to believe that $E[e_j e_k] \not= 0$ for a concerning number of $j\not= k$. What happens if I use a serial correlation ...
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