A Monte Carlo evaluation of the efficiency of the PCSE estimator
Panel data characterized by groupwise heteroscedasticity, cross-sectional correlation, and AR(1) serial correlation pose problems for econometric analyses. It is well known that the asymptotically efficient, Feasible Generalized Least Squares (FGLS) estimator (Parks) sometimes performs poorly in finite samples. In a widely cited paper, Beck and Katz (1995) claim that their estimator panel-corrected SE (PCSE) is able to produce more accurate coefficient SE without any loss in efficiency in 'practical research situations'. This study disputes that claim. We find that the PCSE estimator is usually less efficient than Parks - and substantially so - except when the number of time periods is close to the number of cross sections.
Volume (Year): 17 (2010)
Issue (Month): 1 (January)
|Contact details of provider:|| Web page: http://www.tandfonline.com/RAEL20 |
|Order Information:||Web: http://www.tandfonline.com/pricing/journal/RAEL20|
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Joseph P. Dejuan & Maria Jose Luengo-Prado, 2006.
"Consumption and Aggregate Constraints: International Evidence,"
Oxford Bulletin of Economics and Statistics,
Department of Economics, University of Oxford, vol. 68(1), pages 81-99, 02.
- Joseph DeJuan & Maria J. Luengo-Prado, 2005. "Consumption and Aggregate Constraints: International Evidence," Macroeconomics 0501018, EconWPA.
- Yermack, David, 2006. "Flights of fancy: Corporate jets, CEO perquisites, and inferior shareholder returns," Journal of Financial Economics, Elsevier, vol. 80(1), pages 211-242, April.
- Michael A. Lapré & Nikos Tsikriktsis, 2006. "Organizational Learning Curves for Customer Dissatisfaction: Heterogeneity Across Airlines," Management Science, INFORMS, vol. 52(3), pages 352-366, March.
When requesting a correction, please mention this item's handle: RePEc:taf:apeclt:v:17:y:2010:i:1:p:7-10. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Michael McNulty)
If references are entirely missing, you can add them using this form.