A final twist on the equality of OLS and GLS
✍ Scribed by Andreas Jaeger; Walter Krämer
- Book ID
- 105660428
- Publisher
- Springer-Verlag
- Year
- 1998
- Tongue
- English
- Weight
- 98 KB
- Volume
- 39
- Category
- Article
- ISSN
- 0932-5026
No coin nor oath required. For personal study only.
📜 SIMILAR VOLUMES
O'Brien's Ordinary Least Squares (OLS) test is a well known procedure for testing the multivariate one-sided hypothesis when the covariance matrix is unknown. Simulation results have been reported where the actual test level ex& the nominal one. Here it is shown analytically that the actuai level is
Suppose that spot and futures prices are generated from an errorcorrection model. This note demonstrates that, although the OLS model is misspecified, it provides a hedge ratio that usually outperforms the hedge ratio derived from the correct error-correction model. The opposite result is possible o