This paper develops an estimation and testing framework for a stationary large panel model with observable regressors and unobservable common factors. We allow for slope heterogeneity and for correlation between the common factors and the regressors. We propose a two stage estimation procedure...

Castagnetti, Rossi and Trapani (2014) propose two max-type statistics to test for the presence of a factor structure in a large stationary panel data model. We investigate the use of alternative approaches as average-type and Hausman-type statistics. We show that both approaches can not be used....

This paper develops an estimation and testing framework for a stationary large panel model with observable regressors and unobservable common factors. We allow for slope heterogeneity and for correlation between the common factors and the regressors. We propose a two stage estimation procedure...