Spurious Stochastics in a Short Time-Series Panel Data

Clive Granger and Namwon Hyung

Annals of Economics and Statistics, 1999, issue 55-56, 299-315

Abstract: This paper analyzes the effects of individual-specific size factors in a dynamic panel regression model. Theory and simulation show that an individual-specific size factor, with a fat-tailed distribution or a time-varying property, may cause spurious stochastics. If a pair of panel variables depends on size in some way, then they appear to find a strong relationship, if the size variable is not used in the regression, even if the variables are otherwise independent. Moreover, forecasts based on models that have omitted size-factors are affected seriously by the property of the size-factors. A pooling regression with very short time-series appears to fit well in sample, but forecasts poorly out-of-sample if the neglected individual-specific size-factor has a fat-tailed distribution.

Date: 1999
References: Add references at CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
http://www.jstor.org/stable/20076200 (text/html)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:adr:anecst:y:1999:i:55-56:p:299-315

Access Statistics for this article

Annals of Economics and Statistics is currently edited by Laurent Linnemer

More articles in Annals of Economics and Statistics from GENES Contact information at EDIRC.
Bibliographic data for series maintained by Secretariat General () and Laurent Linnemer ().