Estimation of the Kronecker Covariance Model by Quadratic Form

DOI10.1017/S026646662000050XMaRDI QIDQ6320819arXivFDO

Authors Oliver Linton, Haihan Tang

Publication date 20 June 2019

Published in arXiv

Full work available at URL https://doi.org/10.1017/S026646662000050X

Mathematics Subject Classification ID

Applications of statistics to economics (62P20)

arXiv classification

math.STstat.TH

Abstract: We propose a new estimator, the quadratic form estimator, of the Kronecker product model for covariance matrices. We show that this estimator has good properties in the large dimensional case (i.e., the cross-sectional dimension $n$ is large relative to the sample size $T$). In particular, the quadratic form estimator is consistent in a relative Frobenius norm sense provided $lo{g}^{3}n/To0$. We obtain the limiting distributions of Lagrange multiplier (LM) and Wald tests under both the null and local alternatives concerning the mean vector $mu$. Testing linear restrictions of $mu$ is also investigated. Finally, our methodology performs well in the finite-sample situations both when the Kronecker product model is true, and when it is not true.

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