Robust Wald Tests in SUR Systems with Adding Up Restrictions: An Algebraic Approach to Proofs of Invariance

Surajit Ray, B Ravikumar and N. Eugene Savin
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Surajit Ray: University of Iowa
N. Eugene Savin: University of Iowa

Econometrics from University Library of Munich, Germany

Abstract: In this paper, we examine the robust Wald test statistic for SUR systems with adding up restrictions where the same explanatory variables are present in all equations and where heteroskedasticity and/or autocorrelation of unknown forms may be present. For this case, the coefficients are usually estimated by least squares, equation by equation. For testing the typical hypotheses of interest, we show that the robust Wald statistic, i.e., the statistic based on the heteroskedasticity and autocorrelation consistent covariance matrix estimator, is invariant to the equation deleted. Our proof of invariance is algebraic and does not rely on parametric assumptions or on the knowledge of the covariance matrix of disturbances. Furthermore, the adding-up restrictions we consider are of a general form: the weighted sum of the dependent variables adds up to one of the explanatory variables, not necessarily a constant. We illustrate our results using the Capital Asset Pricing Model.

Keywords: SUR System; Adding up; Wald test; Heteroskedasticity; Autocorrelation (search for similar items in EconPapers)
JEL-codes: C1 (search for similar items in EconPapers)
Pages: 22 pages
Date: 1998-02-09
Note: Type of Document - Postscript; pages: 22 ; figures: included
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Citations: View citations in EconPapers (2)

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Related works:
Working Paper: Robust Wald Tests in SUR Systems with Adding Up Restrictions: An Algebraic Approach to Proofs of Invariance (1998)
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Persistent link: https://EconPapers.repec.org/RePEc:wpa:wuwpem:9802002

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