Authors
Anurag N Banerjee, Jan R Magnus
Publication date
1999/10/1
Journal
Journal of Econometrics
Volume
92
Issue
2
Pages
295-323
Publisher
North-Holland
Description
We consider the standard linear regression model y=Xβ+u with all standard assumptions, except that the variance matrix is assumed to be σ 2Ω(θ) , where Ω depends on m unknown parameters θ 1,…, θ m. Our interest lies exclusively in the mean parameters β or Xβ. We introduce a new sensitivity statistic (B1) which is designed to decide whether ŷ (or β ̂ ) is sensitive to covariance misspecification. We show that the Durbin–Watson test is inappropriate in this context, because it measures the sensitivity of σ ̂ 2 to covariance misspecification. Our results demonstrate that the estimator β ̂ and the predictor ŷ are not very sensitive to covariance misspecification. The statistic is easy to use and performs well even in cases where it is not strictly applicable.
Total citations
Scholar articles
AN Banerjee, JR Magnus - Journal of Econometrics, 1999