Panel data models with cross-sectional dependence: a selective review

Xu, Qiuhua; Cai, Zucong; Fang, Ying

doi:10.1007/s11766-016-3441-9

Cited by 17 publications

(9 citation statements)

References 51 publications

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“…According to Hsiao, Hashem Pesaran, and Rich (2011) and Xu, Cai, and Fang (2016), (2016), panel data sets are likely to exhibit substantial cross-sectional dependence. Hence, one of the most important preliminary tests for panel data is the cross-sectional dependence test, which is conducted through three different tests: Breusch-Pagan Lagrange Multiplier (LM), Pesaran Scaled LM, and Pesaran Cross-sectional Dependence (CD).…”

Section: A Preliminary Testsmentioning

confidence: 99%

Do BRICS Countries Have Similar Trade Integration Patterns?

Rasoulinezhad

Jabalameli

2018

Journal of Economic Integration

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This study explores the similarities of trade integrations in the BRICS member countries. Using time series data from 2001 to 2015 and employing the Panel-Gravity trade model approach, we utilized the separate disaggregated trade data of manufactured goods and raw materials of each BRICS member with United Nations-defined regional groups: the African group, the Asia Pacific group, the Eastern European group, the Latin American and Caribbean group, and the Western European. The analysis results revealed that Russia's manufactured goods and raw material trade integration based on the Heckscher-Ohlin framework with these five regional groups is not similar to that of other BRICS members following the Linder hypothesis. Furthermore, the dominance of China in total trade flows of BRICS has made the Chinese Yuan's effects on trade with partners from different groups stronger than other BRICS members' national currencies impacts. Geographical distance as a proxy for transportation cost has a weaker negative effect on the manufactured goods and raw materials trade patterns of China and India than it does on other countries, creating dissimilarity in the trade patterns of BRICS countries.

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Section: A Preliminary Testsmentioning

confidence: 99%

Do BRICS Countries Have Similar Trade Integration Patterns?

Rasoulinezhad

Jabalameli

2018

Journal of Economic Integration

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“…Note that a sieve method is a global parametric approximation, as far as testing for local curvature of a smooth function, which is the focus of many empirical studies, it is natural to use a local estimator (such as that of functionalcoefficient models) to conduct a statistical testing. For details on the nonparametric or semiparametric panel data models with cross-sectional dependence, readers are referred to the recent survey paper by Xu et al (2016). Our model can be regarded as an extension of Pesaran (2006) which contributes to the literature by proposing a kernel based estimator for functional coefficients and a nonparametric test in a panel data model with cross-sectional dependence.…”

Section: Introductionmentioning

confidence: 99%

Testing capital asset pricing models using functional-coefficient panel data models with cross-sectional dependence

Cai

Fang

2022

Journal of Econometrics

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This paper proposes a functional-coefficient panel data model with cross-sectional dependence motivated by reexamining the empirical performance of conditional capital asset pricing model. In order to characterize the time-varying property of assets' betas and alpha, our proposed model allows the betas to be unknown functions of some macroeconomic and financial instruments. Moreover, a common factor structure is introduced to characterize cross-sectional dependence which is an attractive feature under a panel data regression setting as different assets or portfolios may be affected by same unobserved shocks. Compared to the existing studies, such as the classic Fama-MacBeth two-step procedure, our model can achieve substantial efficiency gains for inference by adopting a one-step procedure using the entire sample rather than a single cross-sectional regression at each time point. We propose a local linear common correlated effects estimator for estimating time-varying betas by pooling the data. The consistency and asymptotic normality of the proposed estimators are established. Another methodological and empirical challenge in asset pricing is how to test the constancy of conditional betas and the significance of pricing errors, we echo this challenge by constructing an L 2-norm statistic for functional-coefficient panel data models allowing for cross-sectional dependence. We show that the new test statistic has a limiting standard normal distribution under the null hypothesis. Finally, the method is applied to test the model in Fama and French (1993) using Fama-French 25 and 100 portfolios, sorted by size and book-to-market ratio, respectively, dated from July 1963 to July 2018.

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“…1 See, for example, Arbia [1], the proceedings of the 2008 Cowles Summer Conference [2], the special issue of the Journal of Econometrics ("Analysis of Spatially Dependent Data," 2007, 140 (1), edited by Baltagi, Kelejian and Prucha), and the special issue of Econometrics ("Spatial Econometrics," 2015, edited by Arbia and Lee). For recent surveys, see [3][4][5]. 2 See, e.g., [6][7][8][9][10][11][12][13][14][15][16][17][18][19].…”

Section: Introductionmentioning

confidence: 99%

“…There has been important recent work on nonparametric models with many finite common factors (e.g., [5,15,16]). They consider common shocks that enter the regression function additively and with disturbances that are modelled as linear functions of mutually-independent unobserved common factors and individual-specific factor loadings.…”

Section: Introductionmentioning

confidence: 99%

“…The empirical application in Souza-Rodrigues [27] considers the impact of hospital volumes of surgical procedures on individual health status (e.g., mortality rate). 5 Group-level observables (i.e., hospital volume of surgeries) may be correlated with group-level unobservables (hospital unobserved quality), which, by its turn, may be indexed by individual characteristics (since an unobserved hospital characteristic that is helpful for patients with some demographic characteristics may not be as helpful for other patients). The strategy proposed by Souza-Rodrigues [27] is to run a nonparametric regression of individual outcomes on individual observables within each group (hospital) in the first step.…”

Section: Introductionmentioning

confidence: 99%

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Nonparametric Regression with Common Shocks

Souza-Rodrigues

2016

Econometrics

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This paper considers a nonparametric regression model for cross-sectional data in the presence of common shocks. Common shocks are allowed to be very general in nature; they do not need to be finite dimensional with a known (small) number of factors. I investigate the properties of the Nadaraya-Watson kernel estimator and determine how general the common shocks can be while still obtaining meaningful kernel estimates. Restrictions on the common shocks are necessary because kernel estimators typically manipulate conditional densities, and conditional densities do not necessarily exist in the present case. By appealing to disintegration theory, I provide sufficient conditions for the existence of such conditional densities and show that the estimator converges in probability to the Kolmogorov conditional expectation given the sigma-field generated by the common shocks. I also establish the rate of convergence and the asymptotic distribution of the kernel estimator.

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Panel data models with cross-sectional dependence: a selective review

Cited by 17 publications

References 51 publications

Do BRICS Countries Have Similar Trade Integration Patterns?

Do BRICS Countries Have Similar Trade Integration Patterns?

Testing capital asset pricing models using functional-coefficient panel data models with cross-sectional dependence

Nonparametric Regression with Common Shocks

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