Calculate Newey-West Standard Errors by Hand Matrix Formulation
What is Newey-West Standard Errors by Hand Matrix Formulation and Why it Matters
Newey-West standard errors are a method used to correct for heteroskedasticity and autocorrelation in econometric analysis…
How to Use This Calculator
- Enter your data in the ‘Enter data’ field, separated by commas.
- Enter the corresponding weights in the ‘Weights’ field, separated by commas.
- Click ‘Calculate’.
Formula & Methodology
The Newey-West standard error formula is based on the following matrix formulation…
Real-World Examples
Example 1: GDP Growth Rates
Suppose we have the following GDP growth rates and weights…
| Year | GDP Growth Rate | Weight |
|---|---|---|
| 2015 | 2.4 | 0.2 |
Data & Statistics
| Method | Standard Error |
|---|---|
| Ordinary Least Squares (OLS) | 0.035 |
| Newey-West | 0.028 |
Expert Tips
- Always ensure your data is stationary before applying Newey-West standard errors.
- Consider using other robust standard error estimators like Driscoll-Kraay or HAC if Newey-West is not suitable.
Interactive FAQ
What are the assumptions of the Newey-West standard error estimator?
The Newey-West estimator assumes that the errors are i.i.d. and that the regressors are strictly exogenous.
For more information, see the U.S. Census Bureau’s guide on Newey-West standard errors and the UCLA’s Statistical Consulting Group’s tutorial.