Information-Aggregation Bias

27 Pages Posted: 6 Nov 2012

See all articles by Marvin Goodfriend

Marvin Goodfriend

Carnegie Mellon University - David A. Tepper School of Business; National Bureau of Economic Research (NBER)

Date Written: June 1, 1991

Abstract

Aggregation in the presence of data processing lags distorts the information content of data, violating orthogonality restrictions that hold at the individual level. Though the phenomenon is general, it is illustrated here for the life cycle-permanent model. Cross-section and pooled-panel data induce information-aggregation bias akin to that in aggregate time series. Calculations show that information-aggregation can seriously bias tests of the life cycle model on aggregate time series, cross-section, and pooled-panel data.

JEL Classification: C2, D12, D82, D91, E21

Suggested Citation

Goodfriend, Marvin, Information-Aggregation Bias (June 1, 1991). Federal Reserve Bank of Richmond Working Paper No. 91-6. Available at SSRN: https://ssrn.com/abstract=2127217 or http://dx.doi.org/10.2139/ssrn.2127217

Marvin Goodfriend (Contact Author)

Carnegie Mellon University - David A. Tepper School of Business ( email )

5000 Forbes Avenue
Pittsburgh, PA 15213-3890
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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