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Theory and methodology for dynamic panel data: tested by simulations based on financial data

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  • Savas Papadopoulos

Abstract

A new method is introduced for panel-data models. Asymptotic robustness is used for a multivariate model with latent variables for a family of estimators. It is shown numerically that in comparison to standard methods we obtain: 1) better predictions in out-of-sample occasions; 2) smaller asymptotic standard errors (a.s.e.s); 3) more accurate a.s.e.s; 4) very small bias. Our methodology handles dynamic models with lag-independent variables, individual and time effects, time heteroscedasticity, non-normality, non-stationarity, fixed variables, non-linear and variant-over-time coefficients, and unbalanced data, by using restrictions on the parameters and the multi-sample technique (m.s.t.). Also, a novel formula for the duplication matrix is provided and a solution for a matrix equation is given.

Suggested Citation

  • Savas Papadopoulos, 2010. "Theory and methodology for dynamic panel data: tested by simulations based on financial data," International Journal of Computational Economics and Econometrics, Inderscience Enterprises Ltd, vol. 1(3/4), pages 239-253.
    • Handle: RePEc:ids:ijcome:v:1:y:2010:i:3/4:p:239-253
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    References listed on IDEAS

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    1. Etti G. Baranoff & Savas Papadopoulos & Thomas W. Sager, 2007. "Capital and Risk Revisited: A Structural Equation Model Approach for Life Insurers," Journal of Risk & Insurance, The American Risk and Insurance Association, vol. 74(3), pages 653-681, September.
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