Exponent of Cross-sectional Dependence for Residuals

Arbeitspapier

In this paper we focus on estimating the degree of cross-sectional dependence in the error terms of a classical panel data regression model. For this purpose we propose an estimator of the exponent of cross-sectional dependence denoted by α; which is based on the number of non-zero pair-wise cross correlations of these errors. We prove that our estimator, ᾶ; is consistent and derive the rate at which ᾶ approaches its true value. We evaluate the finite sample properties of the proposed estimator by use of a Monte Carlo simulation study. The numerical results are encouraging and supportive of the theoretical findings. Finally, we undertake an empirical investigation of α for the errors of the CAPM model and its Fama-French extensions using 10-year rolling samples from S&P 500 securities over the period Sept 1989 - May 2018.

Angaben zum Objekt

• Sprache: Englisch

Verweise und Beziehungen

• Erschienen in: Series: CESifo Working Paper ; No. 7223

Klassifikation und Themen

• Klassifikation: Wirtschaft ; Single Equation Models; Single Variables: Cross-Sectional Models; Spatial Models; Treatment Effect Models; Quantile Regressions ; Multiple or Simultaneous Equation Models: Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
• Thema: pair-wise correlations ; cross-sectional dependence ; cross-sectional averages ; weak and strong factor models ; CAPM and Fama-French factors

Beteiligte, Orts- und Zeitangaben

• Ereignis: Geistige Schöpfung
• (wer): Bailey, Natalia ; Kapetanios, George ; Pesaran, M. Hashem
• Ereignis: Veröffentlichung
• (wer): Center for Economic Studies and ifo Institute (CESifo)
• (wo): Munich
• (wann): 2018

Weitere Informationen

• Handle: http://hdl.handle.net/10419/185421
• Letzte Aktualisierung: 10.03.2025, 11:45 MEZ