Title: The Stambaugh bias in panel predictive regressions
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.