Bootstrap Inference in Regressions with Estimated Factors and Serial Correlation

22 Pages Posted: 24 Apr 2015

See all articles by Antoine Djogbenou

Antoine Djogbenou

University of Montreal - Department of Economics

Sílvia Gonçalves

University of Montreal - Department of Economics

Benoit Perron

University of Montreal - Department of Economics; Center for Interuniversity Research and Analysis on Organization (CIRANO); University of Montreal - Center for Interuniversity Research in Econometrics

Date Written: May 2015

Abstract

This article considers bootstrap inference in a factor‐augmented regression context where the errors could potentially be serially correlated. This generalizes results in Gonçalves & Perron (2014) and makes the bootstrap applicable to forecasting contexts where the forecast horizon is greater than one. We propose and justify two residual‐based approaches, a block wild bootstrap and a dependent wild bootstrap. Our simulations document improvement in coverage rates of confidence intervals for the coefficients when using block wild bootstrap or dependent wild bootstrap relative to both asymptotic theory and the wild bootstrap when serial correlation is present in the regression errors.

Keywords: Factor model, bootstrap, serial correlation, forecast

Suggested Citation

Djogbenou, Antoine and Goncalves, Silvia and Perron, Benoit, Bootstrap Inference in Regressions with Estimated Factors and Serial Correlation (May 2015). Recent developments in bootstrap methods for dependent data, Vol. 36, Issue 3, pp. 481-502, 2015. Available at SSRN: https://ssrn.com/abstract=2598338 or http://dx.doi.org/10.1111/jtsa.12118

Antoine Djogbenou (Contact Author)

University of Montreal - Department of Economics ( email )

C.P. 6128, succursale Centre-Ville
Montreal, Quebec H3C 3J7
Canada

Silvia Goncalves

University of Montreal - Department of Economics ( email )

C.P. 6128, succursale Centre-Ville
Montreal, Quebec H3C 3J7
Canada

Benoit Perron

University of Montreal - Department of Economics ( email )

C.P. 6128, succursale Centre-Ville
Montreal, Quebec H3C 3J7
Canada
514-343-2126 (Phone)
514-343-5831 (Fax)

Center for Interuniversity Research and Analysis on Organization (CIRANO) ( email )

1130 Sherbrooke west, 14th floor
Montreal H3A 2M8, Quebec
Canada

University of Montreal - Center for Interuniversity Research in Econometrics ( email )

C.P. 6128, Succursale Centre-ville
Montreal, Quebec H3C 3J7
Canada

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