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Cross-sectional averages versus principal components

Westerlund, Joakim; Urbain, Jean-Pierre - In: Journal of Econometrics 185 (2015) 2, pp. 372-377

In spite of the increased use of factor-augmented regressions in recent years, little is known regarding the relative merits of the two main approaches to estimation and inference, namely, the cross-sectional average and principal component estimators. By providing a formal comparison of the...

Persistent link: https://www.econbiz.de/10011190733

Asymptotics of the principal components estimator of large factor models with weakly influential factors

Onatski, Alexei - In: Journal of Econometrics 168 (2012) 2, pp. 244-258

This paper introduces a drifting-parameter asymptotic framework to derive accurate approximations to the finite sample distribution of the principal components (PC) estimator in situations when the factors’ explanatory power does not strongly dominate the explanatory power of the...

Persistent link: https://www.econbiz.de/10010577511

Detecting big structural breaks in large factor models

Chen, Liang; Dolado, Juan J.; Gonzalo, Jesús - In: Journal of Econometrics 180 (2014) 1, pp. 30-48

power relative to other recently proposed tests on this issue, and can be easily implemented to avoid forecasting failures …

Persistent link: https://www.econbiz.de/10011052242

Forecasting by factors, by variables, by both or neither?

Castle, Jennifer L.; Clements, Michael P.; Hendry, David F. - In: Journal of Econometrics 177 (2013) 2, pp. 305-319

We consider forecasting with factors, variables and both, modeling in-sample using Autometrics so all principal …-error taxonomy for factor models highlights the impacts of location shifts on forecast-error biases. Forecasting US GDP over 1-, 4 … for nowcasting or short-term forecasting, but their relative performance declines as the forecast horizon increases …

Persistent link: https://www.econbiz.de/10010709434

Generalized dynamic panel data models with random effects for cross-section and time

Mesters, G.; Koopman, S.J. - In: Journal of Econometrics 180 (2014) 2, pp. 127-140

An exact maximum likelihood method is developed for the estimation of parameters in a nonlinear non-Gaussian dynamic panel data model with unobserved random individual-specific and time-varying effects. We propose an estimation procedure based on the importance sampling technique. In particular,...

Persistent link: https://www.econbiz.de/10010776911

A nonlinear panel data model of cross-sectional dependence

Kapetanios, George; Mitchell, James; Shin, Yongcheol - In: Journal of Econometrics 179 (2014) 2, pp. 134-157

This paper proposes a nonlinear panel data model which can endogenously generate both ‘weak’ and ‘strong’ cross-sectional dependence. The model’s distinguishing characteristic is that a given agent’s behaviour is influenced by an aggregation of the views or actions of those around...

Persistent link: https://www.econbiz.de/10011052336

The power of PANIC

Westerlund, Joakim - In: Journal of Econometrics 185 (2015) 2, pp. 495-509

The current paper considers the asymptotic local power of second-generation panel unit root tests that are robust to the presence of cross-section dependence in the form of common factors. As a basis for our analysis, we take the PANIC approach of Bai and Ng (2004, 2010), which is one of the...

Persistent link: https://www.econbiz.de/10011190726

The effect of recursive detrending on panel unit root tests

Westerlund, Joakim - In: Journal of Econometrics 185 (2015) 2, pp. 453-467

This paper analyzes the properties of panel unit root tests based on recursively detrended data. The analysis is conducted while allowing for a (potentially) non-linear trend function, which represents a more general consideration than the current state of affairs with (at most) a linear trend....

Persistent link: https://www.econbiz.de/10011190734

A Lagrange Multiplier test for cross-sectional dependence in a fixed effects panel data model

Baltagi, Badi H.; Feng, Qu; Kao, Chihwa - In: Journal of Econometrics 170 (2012) 1, pp. 164-177

It is well known that the standard Breusch and Pagan (1980) LM test for cross-equation correlation in a SUR model is not appropriate for testing cross-sectional dependence in panel data models when the number of cross-sectional units (n) is large and the number of time periods (T) is small. In...

Persistent link: https://www.econbiz.de/10011052261

Sieve estimation of panel data models with cross section dependence

Su, Liangjun; Jin, Sainan - In: Journal of Econometrics 169 (2012) 1, pp. 34-47

In this paper we consider the problem of estimating semiparametric panel data models with cross section dependence, where the individual-specific regressors enter the model nonparametrically whereas the common factors enter the model linearly. We consider both heterogeneous and homogeneous...

Persistent link: https://www.econbiz.de/10010577517