removing heteroscedasticity in OLS estimation
Posted: Mon Mar 17, 2014 12:32 pm
Hi, I have one question: Is it possible remove heteroscedasticity by including lags of residuals in OLS?????
I mean this: R_(it )= α_(i )+β_i R_(mt )+ρ_i ε_(i,t -1 )+ u_(it )
where: ε_(i,t -1) is a residual of equity i in the period t-1, ρ_i is the coefficient residual of the previous period and u_(it )is a residual of equity in period t
Is this transformation GLS or still OLS?
If yes, Do you konw some relevant literature, where I could learn more about this?
Thank you for any answers in advance.
I mean this: R_(it )= α_(i )+β_i R_(mt )+ρ_i ε_(i,t -1 )+ u_(it )
where: ε_(i,t -1) is a residual of equity i in the period t-1, ρ_i is the coefficient residual of the previous period and u_(it )is a residual of equity in period t
Is this transformation GLS or still OLS?
If yes, Do you konw some relevant literature, where I could learn more about this?
Thank you for any answers in advance.