Estimating cointegrated panels with common factors and the forward rate unbiasedness hypothesis
(2007) In Journal of Financial Econometrics 5(3). p.491-522- Abstract
- This article proposes a bias-adjusted estimator for use in cointegrated panel regressions when the errors are cross-sectionally correlated through an unknown common factor structure. The asymptotic distribution of the new estimator is derived and is examined in small samples using Monte Carlo simulations. For the estimation of the number of factors, several information-based criteria are considered. The simulation results suggest that the new estimator performs well in comparison to existing ones. In our empirical application, we provide new evidence suggesting that the forward rate unbiasedness hypothesis cannot be rejected.
Please use this url to cite or link to this publication:
https://lup.lub.lu.se/record/974353
- author
- Westerlund, Joakim LU
- organization
- publishing date
- 2007
- type
- Contribution to journal
- publication status
- published
- subject
- keywords
- common factor model, forward rate unbiasedness hypothesis, cross-section dependence, panel cointegration, information criteria
- in
- Journal of Financial Econometrics
- volume
- 5
- issue
- 3
- pages
- 491 - 522
- publisher
- Oxford University Press
- external identifiers
-
- wos:000250779100005
- scopus:34447633396
- ISSN
- 1479-8409
- DOI
- 10.1093/jjfinec/nbm006
- language
- English
- LU publication?
- yes
- id
- 0cf411a4-165c-4687-9439-843a4cfc39d7 (old id 974353)
- date added to LUP
- 2016-04-01 11:43:50
- date last changed
- 2022-04-28 19:11:39
@article{0cf411a4-165c-4687-9439-843a4cfc39d7, abstract = {{This article proposes a bias-adjusted estimator for use in cointegrated panel regressions when the errors are cross-sectionally correlated through an unknown common factor structure. The asymptotic distribution of the new estimator is derived and is examined in small samples using Monte Carlo simulations. For the estimation of the number of factors, several information-based criteria are considered. The simulation results suggest that the new estimator performs well in comparison to existing ones. In our empirical application, we provide new evidence suggesting that the forward rate unbiasedness hypothesis cannot be rejected.}}, author = {{Westerlund, Joakim}}, issn = {{1479-8409}}, keywords = {{common factor model; forward rate unbiasedness hypothesis; cross-section dependence; panel cointegration; information criteria}}, language = {{eng}}, number = {{3}}, pages = {{491--522}}, publisher = {{Oxford University Press}}, series = {{Journal of Financial Econometrics}}, title = {{Estimating cointegrated panels with common factors and the forward rate unbiasedness hypothesis}}, url = {{http://dx.doi.org/10.1093/jjfinec/nbm006}}, doi = {{10.1093/jjfinec/nbm006}}, volume = {{5}}, year = {{2007}}, }