Estimating cointegrated panels with common factors and the forward rate unbiasedness hypothesis
Author
Summary, in English
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.
Department/s
Publishing year
2007
Language
English
Pages
491-522
Publication/Series
Journal of Financial Econometrics
Volume
5
Issue
3
Document type
Journal article
Publisher
Oxford University Press
Topic
- Economics
Keywords
- common factor model
- forward rate unbiasedness hypothesis
- cross-section dependence
- panel cointegration
- information criteria
Status
Published
ISBN/ISSN/Other
- ISSN: 1479-8409