HAC Covariance Matrix Estimation in Quantile Regression

B-Tier
Journal: Journal of the American Statistical Association
Year: 2024
Volume: 119
Issue: 547
Pages: 2305-2316

Authors (2)

Score contribution per author:

1.005 = (α=2.01 / 2 authors) × 1.0x B-tier

α: calibrated so average coauthorship-adjusted count equals average raw count

Abstract

This study considers an estimator for the asymptotic variance-covariance matrix in time-series quantile regression models which is robust to the presence of heteroscedasticity and autocorrelation. When regression errors are serially correlated, the conventional quantile regression standard errors are invalid. The proposed solution is a quantile analogue of the Newey-West robust standard errors. We establish the asymptotic properties of the heteroscedasticity and autocorrelation consistent (HAC) covariance matrix estimator and provide an optimal bandwidth selection rule. The quantile sample autocorrelation coefficient is biased toward zero in finite sample which adversely affects the optimal bandwidth estimation. We propose a simple alternative estimator that effectively reduces the finite sample bias. Numerical simulations provide evidence that the proposed HAC covariance matrix estimator significantly improves the size distortion problem. To illustrate the usefulness of the proposed robust standard error, we examine the impacts of the expansion of renewable energy resources on electricity prices. Supplementary materials for this article are available online.

Technical Details

RePEc Handle
repec:taf:jnlasa:v:119:y:2024:i:547:p:2305-2316
Journal Field
Econometrics
Author Count
2
Added to Database
2026-01-25