Figure 4.
The line chart presents rejection frequency on the y-axis against beta on the x-axis for G M M-G L S-I V, G L S-I V, O L S, and G M M estimation methods. The G M M-G L S-I V and G L S-I V curves remain nearly identical, falling sharply to a minimum near beta 0 before rising again towards higher rejection frequencies at positive and negative beta values. The O L S curve differs substantially, increasing steadily from low rejection frequencies at negative beta values to nearly 1 at positive beta values. The G M M curve exhibits a smoother transition with moderate rejection frequencies around beta 0 and gradual increases towards the extremes.Empirical rejection frequencies of nominal 5% t-Test of . Hansen and Hodrick regression, general case with ARMA(1,3) errors