Newey-west standard errors

1. What do Newey-West standard errors do?
2. When should you use Newey-West standard errors?
3. What is Newey-West method?
4. What does Newey-West test do?

What do Newey-West standard errors do?

The Newey-West method handles autocorrelation with lags up to h, and so it is assumed that lags larger than h can be ignored. Note too that Newey-West not only corrects for autocorrelation it also corrects for heteroscedasticity (heterogeneity of variances).

When should you use Newey-West standard errors?

Newey-West standard error method is a robust method/estimator which is very accurate when there is presence of heteroskedasticity and autocorrelation. Also, when in the panel model there is a lagged value of an indicator then this method is very consistent.

What is Newey-West method?

A Newey–West estimator is used in statistics and econometrics to provide an estimate of the covariance matrix of the parameters of a regression-type model where the standard assumptions of regression analysis do not apply. It was devised by Whitney K. Newey and Kenneth D.

What does Newey-West test do?

The Newey–West (1987) variance estimator is an extension that produces consistent estimates when there is autocorrelation in addition to possible heteroskedasticity. The Newey–West variance estimator handles autocorrelation up to and including a lag of m, where m is specified by stipulating the lag() option.