Improvement in finite-sample properties of GMM-based Wald tests

GMM-based Wald tests tend to overreject when used for small samples, mainly due to inaccurate estimation of the weighting matrix. This article proposes applying the shrinkage method to address this problem. Using a possibly-misspecified factor model, the shrinkage method can provide a good estimator for the weighting matrix, and hence improve the finite-sample performance of the GMM-based Wald tests. Copyright Springer-Verlag 2013

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Year of publication:	2013
Authors:	Chen, Qihui ; Ren, Yu
Published in:	Computational Statistics. - Springer. - Vol. 28.2013, 2, p. 735-749
Publisher:	Springer
Subject:	Generalized method of moments \| Wald tests \| Finite-sample properties \| Covariance matrix \| Shrinkage method

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Extent:	text/html
Type of publication:	Article
Source:	RePEc - Research Papers in Economics

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