Fitter Function for IV Predictability Tests

Basic function called by ivx_iv. Should only be used directly by experienced users.

Usage

ivx_iv_fit(y, x, instruments = "comb", d = 0.5, kappa = 0.2, eta = 0.85, ...)

Arguments

y

vector of observations of length n, or a matrix with n rows.

x

design matrix of dimension n * p.

instruments

instrument set; see Details.

d

order of the fractional difference for "frac", in (0, 1/2]; the paper uses 1/2.

kappa, eta

the long-difference lag is \(k_T = \lfloor \kappa T^\eta \rfloor\) (paper: 0.2 and 0.85), truncated to \(t - 1\).

...

currently unused.

Examples

ivx_iv_fit(kms$Ret, as.matrix(kms$DP))$tstat
#>       x1 
#> 0.490082