Research output per year
Research output per year
Natalia Bailey, George Kapetanios, M. Hashem Pesaran
Research output: Contribution to journal › Article › Research › peer-review
In this paper, we focus on estimating the degree of cross-sectional dependence in the error terms of a classical panel data regression model. For this purpose we propose an estimator of the exponent of cross-sectional dependence denoted by α, which is based on the number of non-zero pair-wise cross correlations of these errors. We prove that our estimator, α~ , is consistent and derive the rate at which it approaches its true value. We also propose a resampling procedure for the construction of confidence bounds around the estimator of α. We evaluate the finite sample properties of the proposed estimator by use of a Monte Carlo simulation study. The numerical results are encouraging and supportive of the theoretical findings. Finally, we undertake an empirical investigation of α for the errors of the CAPM model and its Fama-French extensions using 10-year rolling samples from S&P 500 securities over the period Sept 1989 - May 2018.
Original language | English |
---|---|
Pages (from-to) | 46-102 |
Number of pages | 57 |
Journal | Sankhya B |
Volume | 81 |
Issue number | S1 |
DOIs | |
Publication status | Published - 2019 |
Research output: Contribution to journal › Comment / Debate › Other › peer-review