[R-SIG-Finance] GMM

[Pankaj K Agarwal]

Respected Eric SirTo rephrase what you said (just to test my understanding of it): If the OLS moment conditions are perfectly identified, and HAC standard errors are used, the output (standard errors) will be identical to those from GMM. Am i right sir? I am using a linear model which is a CAPM variant with an additional squared market premium term. In this case, will not the GMM and OLS with HAC give same results?Your comment will be invaluable sir. Regards,Pankaj K Agarwal


 

    On Tuesday, 28 June 2016 10:27 PM, Eric Zivot <ezivot at uw.edu> wrote:
 
 

 No
OLS is a special case of GMM where the number of moment conditions is the same as the number of parameters. In this case the efficient weight matrix does not matter for estimation but does matter for the calculation of an estimate of the asymptotic variance matrix of the OLS parameters. This is what HAC standard errors do in the sandwich function vcovHAC()

-----Original Message-----
From: R-SIG-Finance [mailto:r-sig-finance-bounces at r-project.org] On Behalf Of Pankaj K Agarwal via R-SIG-Finance
Sent: Monday, June 27, 2016 11:17 AM
To: R-sig-finance <r-sig-finance at r-project.org>
Cc: H.K Pradhan <pradhan at xlri.ac.in>
Subject: [R-SIG-Finance] GMM

Apologies if this question is irrelevant for this group.
Does using HAC standard errors (Newey and West: package sandwich) in OLS regression make using GMM (package: GMM) redundant?
 Regards,Pankaj K Agarwal
+91-98397-11444http://in.linkedin.com/in/pankajkagarwal/
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