Heavy tails of OLS
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Heavy tails of OLS. / Mikosch, Thomas Valentin; de Vries, Casper.
I: Journal of Econometrics, Bind 172, Nr. 2, 2013, s. 205-221.Publikation: Bidrag til tidsskrift › Tidsskriftartikel › Forskning › fagfællebedømt
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TY - JOUR
T1 - Heavy tails of OLS
AU - Mikosch, Thomas Valentin
AU - de Vries, Casper
PY - 2013
Y1 - 2013
N2 - Suppose the tails of the noise distribution in a regression exhibit power law behavior. Then thedistribution of the OLS regression estimator inherits this tail behavior. This is relevant for regressions involving financial data. We derive explicit finite sample expressions for the tail probabilities of the distribution of the OLS estimator. These are useful for inference. Simulations for mediumsized samples reveal considerable deviations of the coefficient estimates from their true values, in line with our theoretical formulas. The formulas provide a benchmark for judging the observed highly variable cross country estimates of the expectations coefficient in yield curve regressions.
AB - Suppose the tails of the noise distribution in a regression exhibit power law behavior. Then thedistribution of the OLS regression estimator inherits this tail behavior. This is relevant for regressions involving financial data. We derive explicit finite sample expressions for the tail probabilities of the distribution of the OLS estimator. These are useful for inference. Simulations for mediumsized samples reveal considerable deviations of the coefficient estimates from their true values, in line with our theoretical formulas. The formulas provide a benchmark for judging the observed highly variable cross country estimates of the expectations coefficient in yield curve regressions.
U2 - 10.1016/j.jeconom.2012.08.015
DO - 10.1016/j.jeconom.2012.08.015
M3 - Journal article
VL - 172
SP - 205
EP - 221
JO - Journal of Econometrics
JF - Journal of Econometrics
SN - 0304-4076
IS - 2
ER -
ID: 46001523