NDLI: The heteroskedasticity-consistent covariance estimator in accounting

Content Provider	Springer Nature Link
Author	Curto, José Dias Pinto, José Castro Morais, Ana Isabel Lourenço, Isabel Maria
Copyright Year	2010
Abstract	The main purpose of this paper is to compare the White (1980) heteroskedasticity-consistent (HC) covariance matrix estimator with alternative estimators. Many regression packages compute the White (1980) heteroskedasticity-consistent (HC) covariance matrix estimator. The common procedure in Accounting and Finance research to deal with the heteroskedasticity problem is based on this estimator, despite its worse finite-samples properties when compared with other consistent estimators. In this paper we compare several HC covariance matrix estimators based on a sample of 3706 European listed companies from Austria, Finland, France, Germany, Greece, Ireland, Italy, Netherlands, Norway, Portugal, Spain, Sweden and the United Kingdom. We conclude that HC standard errors increase when finite-samples more appropriate estimators are considered and in the most part of countries the Ohlson (1995) model coefficients estimates became statistically insignificant. This can be explained by the high leverage points in the design matrix. To the best of our knowledge it is the first time that these alternative estimators are compared with the one of White (1980) in accounting research.
Starting Page	427
Ending Page	449
Page Count	23
File Format	PDF
ISSN	0924865X
Journal	Review of Quantitative Finance and Accounting
Volume Number	37
Issue Number	4
e-ISSN	15737179
Language	English
Publisher	Springer US
Publisher Date	2010-10-06
Publisher Place	Boston
Access Restriction	One Nation One Subscription (ONOS)
Subject Keyword	Heteroskedasticity Consistent estimator Ohlson model Operations Research/Decision Theory Accounting/Auditing Finance/Investment/Banking Econometrics
Content Type	Text
Resource Type	Article
Subject	Finance Accounting

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