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I am reading Table II on page 28 in Bali et al. (2007), Value at Risk and the Cross-Section of Hedge Fund Returns:

Table II Bali et al. (2007)

Please can anyone explain the calculation of t-statistic and Newey West t-statistic in the following table? I am bit confused how they calculate the standard deviation of the average return differential.

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    $\begingroup$ Could you provide the reference where this table is from? $\endgroup$ – LocalVolatility Mar 14 '18 at 21:38
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    $\begingroup$ this is part of a paper " Value at risk and the cross-section of hedge fund returns by Bali et al. (2007) $\endgroup$ – S H Ali Mar 15 '18 at 2:42
  • $\begingroup$ Thanks Alex for edited my question, I am totally new to this forum so don't know how to get the answers, can you please help me to get the answer of this query. $\endgroup$ – S H Ali Mar 15 '18 at 20:08
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The values for $VaR$ and $CF-VaR$ are the time-series means for each cross-sectional values. As mentioned in the table description, you calculate both variables for each month from Jan. 1995 to Dec. 2003 and the table reports their time-series means.

The standard t-statistic is applied with $H_0:\bar{VaR}=0$ and $H_0:\bar{CF-VaR}=0$. The standard deviation of both your variables is derived from their time-series movement from Jan. 1995 to Dec. 2003. With values of -0.17 and -0.14, $VaR$ and $CF-VaR$ are statistically not significant different from zero. Newey-West t-statistic corrects both estimations for heteroskedasticity and autocorrelation within the time-series of your variables.

For further details, you may look at this excellent answer on Newey-West and read standard econometric books like Murray or Brooks.

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