Publication Type

Journal Article

Version

acceptedVersion

Publication Date

1-2018

Abstract

We provide a new test for equality of two symmetric positive-definite matrices that leads to a convenient mechanism for testing specification using the information matrix equality or the sandwich asymptotic covariance matrix of the GMM estimator. The test relies on a new characterization of equality between two k dimensional symmetric positive-definite matrices A and B: the traces of AB−1 and BA−1 are equal to k if and only if A=B. Using this simple criterion, we introduce a class of omnibus test statistics for equality and examine their null and local alternative approximations under some mild regularity conditions. A preferred test in the class with good omni-directional power is recommended for practical work. Monte Carlo experiments are conducted to explore performance characteristics under the null and local as well as fixed alternatives. The test is applicable in many settings, including GMM estimation, SVAR models and high dimensional variance matrix settings.

Keywords

Matrix equality, Trace, Determinant, Arithmetic mean, Geometric mean, Harmonic mean, Sandwich covariance matrix, Eigenvalues

Discipline

Econometrics

Research Areas

Econometrics

Publication

Journal of Econometrics

Volume

202

Issue

1

First Page

45

Last Page

56

ISSN

0304-4076

Identifier

10.1016/j.jeconom.2017.05.020

Publisher

Elsevier: 24 months

Copyright Owner and License

Authors

Additional URL

https://doi.org/10.1016/j.jeconom.2017.05.020

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