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On the estimation and testing of predictive panel regressions

Author

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  • Karabiyik, Hande
  • Westerlund, Joakim
  • Narayan, Paresh

Abstract

Hjalmarsson (2010) considers an OLS-based estimator of predictive panel regressions that is argued to be mixed normal under very general conditions. In a recent paper, Westerlund et al. (2016) show that while consistent, the estimator is generally not mixed normal, which invalidates standard normal and chi-squared inference. The purpose of the present paper is to study the consequences of this theoretical result in small samples, which is done using both simulated and real data.

Suggested Citation

  • Karabiyik, Hande & Westerlund, Joakim & Narayan, Paresh, 2016. "On the estimation and testing of predictive panel regressions," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 45(C), pages 115-125.
    • Handle: RePEc:eee:intfin:v:45:y:2016:i:c:p:115-125
    DOI: 10.1016/j.intfin.2016.07.003
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    Cited by:

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    2. Narayan, Paresh Kumar & Liu, Ruipeng, 2018. "A new GARCH model with higher moments for stock return predictability," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 56(C), pages 93-103.

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    More about this item

    Keywords

    Panel data; Predictive regression; Common factors; Mixed normality;
    All these keywords.

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models

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