erc/metu
INTERNATIONAL CONFERENCE IN ECONOMICS  IV
September 13-16, 2000, Ankara

Comparison of Several Heteroskedasticity-Consistent Covariance Matrix Estimators

Mehmet Orhan (Faith University)
Asad Zaman (Lahore University of Management Science, Pakistan)

Abstract

We update MacKinnon and White's (1985) comparison of four HCCME's (Heteroskedasticity Consistent Covariance Matrix Estimators). Several additional estimators from the literature are included in our comparison. We also introduce four new estimators and compare the estimators relative to four different loss functions. For the (indirect) loss functions relating to distribution and inference aspects, an ML based estimator emerges as the top performer. When the loss function focusses directly on the quality of the HCCME as an estimate of the true covariance, then a shrinkage type estimator (JS) appears to be the best choice.

Economic Research Center
Middle East Technical University
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