The Stambaugh bias in panel predictive regressions
By: Erik Hjalmarsson.
Contributors: Board of Governors of the Federal Reserve System (U.S.)
Series: International finance discussion papers -- no. 914; International finance discussion papers (Online) -- no. 914.
Publisher: Federal Reserve Board
Published: 2007
Place of publication: Washington, D.C
Language: eng
Format: Electronic resource
Description: "This paper analyzes predictive regressions in a panel data setting.  The standard fixed effects estimator suffers from a small sample bias, which is the analogue of the Stambaugh bias in time-series predictive regressions.  Monte Carlo evidence shows that the bias and resulting size distortions can be severe.  A new bias-corrected estimator is proposed, which is shown to work well in finite samples and to lead to approximately normally distributed t-statistics.  Overall, the results show that the econometric issues associated with predictive regressions when using time-series data to a large extent also carry over to the panel case.  The results are illustrated with an application to predictability in international stock indices"--Federal Reserve Board web site.
Notes: Title from PDF file as viewed on 1/24/2008.

Includes bibliographical references.

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