Estimating Standard Errors in Finance Panel Data Sets: Comparing Approaches
69 Pages Posted: 14 Aug 2012 Last revised: 29 Oct 2022
There are 3 versions of this paper
Estimating Standard Errors in Finance Panel Data Sets: Comparing Approaches
Estimating Standard Errors in Finance Panel Data Sets: Comparing Approaches
Estimating Standard Errors in Finance Panel Data Sets: Comparing Approaches
Date Written: April 2005
Abstract
In both corporate finance and asset pricing empirical work, researchers are often confronted with panel data. In these data sets, the residuals may be correlated across firms and across time, and OLS standard errors can be biased. Historically, the two literatures have used different solutions to this problem. Corporate finance has relied on Rogers standard errors, while asset pricing has used the Fama-MacBeth procedure to estimate standard errors. This paper will examine the different methods used in the literature and explain when the different methods yield the same (and correct) standard errors and when they diverge. The intent is to provide intuition as to why the different approaches sometimes give different answers and give researchers guidance for their use.
Suggested Citation: Suggested Citation
Do you have negative results from your research you’d like to share?
Recommended Papers
-
Estimating Standard Errors in Finance Panel Data Sets: Comparing Approaches
-
When Does the Market Matter? Stock Prices and the Investment of Equity-Dependent Firms
By Malcolm P. Baker, Jeffrey Wurgler, ...
-
When Does the Market Matter? Stock Prices and the Investment of Equity-Dependent Firms
By Malcolm P. Baker, Jeremy C. Stein, ...
-
When Does the Market Matter? Stock Prices and the Investment of Equity-Dependent Firms
By Malcolm P. Baker, Jeffrey Wurgler, ...
-
Stock Valuation and Learning About Profitability
By Lubos Pastor and Pietro Veronesi
-
Stock Valuation and Learning About Profitability
By Lubos Pastor and Pietro Veronesi
-
Stock Valuation and Learning About Profitability
By Lubos Pastor and Pietro Veronesi
-
Market Reactions to Tangible and Intangible Information
By Kent D. Daniel and Sheridan Titman
-
Market Reactions to Tangible and Intangible Information
By Kent D. Daniel and Sheridan Titman
-
Forecasting Crashes: Trading Volume, Past Returns and Conditional Skewness in Stock Prices
By Joseph Chen, Harrison G. Hong, ...