Testing slope homogeneity in large panels with serial correlation

Blomquist, Johan; Westerlund, Joakim

doi:10.1016/j.econlet.2013.09.012

Cited by 352 publications

(132 citation statements)

References 6 publications

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“…Now we consider asset pricing tests with cross-sectional dependence. There are several testing procedures for slope homogeneity available in the literature; see, for example, Pesaran, Smith, and Im (1996), Phillips and Sul (2003), Pesaran and Yamagata (2008), Blomquist and Westerlund (2013), and Su and Chen (2013). Ando and Bai (2015) extend these tests by accommodating the presence of cross-sectional correlation between the error terms of the different regression models indexed by i = 1, … , N. However, to the best of our knowledge there is no available test of slope homogeneity in panel data models that accounts for generated regressors.…”

Section: Third Stage: Homogeneity Testsmentioning

confidence: 99%

Tests of asset pricing with time‐varying factor loads

Galvao

Montes‐Rojas

Olmo

2019

J of Applied Econometrics

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Summary This paper proposes an empirical asset pricing test based on the homogeneity of the factor risk premia across risky assets. Factor loadings are considered to be dynamic and estimated from data at higher frequencies. The factor risk premia are obtained as estimates from time series regressions applied to each risky asset. We propose Swamy‐type tests robust to the presence of generated regressors and dependence between the pricing errors to assess the homogeneity of the factor risk premia and the zero intercept hypothesis. An application to US industry portfolios shows overwhelming evidence rejecting the capital asset pricing model, and the three and five factor models developed by Fama and French (Journal of Financial Economics, 1993, 33, 3–56; Journal of Financial Economics, 2015, 116, 1–22). In particular, we reject the null hypotheses of a zero intercept, homogeneous factor risk premia across risky assets, and the joint test involving both hypotheses.

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Section: Third Stage: Homogeneity Testsmentioning

confidence: 99%

Tests of asset pricing with time‐varying factor loads

Galvao

Montes‐Rojas

Olmo

2019

J of Applied Econometrics

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“…However, Blomquist and Westerlund (2013) pointed out that the test cannot deal with the practically relevant case of heteroskedastic and serially correlated errors. To overcome this difficulty, Blomquist and Westerlund (2013) proposed a generalized test that accommodates both features.…”

Section: Hac Version Of ∆ Testmentioning

confidence: 99%

“…Furthermore, with serial correlation, we can also use the method of Blomquist and Westerlund (2013) to compute Ω i .…”

Section: Case 3: Heteroskedastic Errors Over I and Tmentioning

confidence: 99%

“…In finance, for example, testing asset pricing models, including the capital asset pricing model (CAPM), Fama and French's (1992) three-factor model and Carhart's (1997) fourfactor model, is related to testing homogeneity (in this case, it involves testing intercept homogeneity, which is a special case of the test considered in this paper). There are a number of studies on testing for slope homogeneity in panel data models, including Pesaran et al (1996), Phillips and Sul (2003), Pesaran and Yamagata (2008), Blomquist and Westerlund (2013), and Su and Chen (2013).…”

Section: Introductionmentioning

confidence: 99%

“…However, the test does not allow cross-sectionally, serially correlated errors. To deal with the serially correlated errors, Blomquist and Westerlund (2013) extended their test to the case when the errors are heteroskedastic and/or serially correlated in an unknown fashion. However, the test still does not deal with the practically relevant case of cross-sectional dependence.…”

Section: Introductionmentioning

confidence: 99%

See 2 more Smart Citations

A simple new test for slope homogeneity in panel data models with interactive effects

Ando

Bai

2015

Economics Letters

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We consider the problem of testing for slope homogeneity in high-dimensional panel data models with cross-sectionally correlated errors. We consider a Swamy-type test for slope homogeneity by incorporating interactive fixed effects. We show that the proposed test statistic is asymptotically normal. Our test allows the explanatory variables to be correlated with the unobserved factors, factor loadings, or with both. Monte Carlo simulations demonstrate that the proposed test has good size control and good power.

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US grass‐fed beef premiums

2022

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This study examined monthly retail‐level price premiums for grass‐fed beef (relative to conventional grain‐fed beef) in the United States from 2014 through 2021. We found that premiums were heterogeneous, with premium cuts, such as sirloin steak, tenderloin, ribeye and filet mignon enjoying the highest premiums. Premiums were not consistent with price levels, as the lowest premiums were observed for short ribs, skirt steak and flank steak. Our findings suggest that grass‐fed beef price premiums were negatively affected by the consumption of food away from home. Changes in income, increased information about taste, protein and minerals, fat, revocation of the USDA grass‐fed certification program in 2016 and COVID‐19 pandemic, also affected premiums for several individual cuts. Premiums were not sensitive to changes in information about climate change. [EconLit Citations: Q11, Q13].

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Testing slope homogeneity in large panels with serial correlation

Cited by 352 publications

References 6 publications

Tests of asset pricing with time‐varying factor loads

Tests of asset pricing with time‐varying factor loads

A simple new test for slope homogeneity in panel data models with interactive effects

US grass‐fed beef premiums

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