Linear Regression for Panel With Unknown Number of Factors as Interactive Fixed Effects

Hyungsik Roger Moon and Martin Weidner

Papers from arXiv.org

Abstract: In this paper we study the least squares (LS) estimator in a linear panel regression model with unknown number of factors appearing as interactive fixed effects. Assuming that the number of factors used in estimation is larger than the true number of factors in the data, we establish the limiting distribution of the LS estimator for the regression coefficients as the number of time periods and the number of cross-sectional units jointly go to infinity. The main result of the paper is that under certain assumptions the limiting distribution of the LS estimator is independent of the number of factors used in the estimation, as long as this number is not underestimated. The important practical implication of this result is that for inference on the regression coefficients one does not necessarily need to estimate the number of interactive fixed effects consistently.

Date: 2026-05
References: Add references at CitEc
Citations:

Published in Econometrica 83 (2015) 1543-1579

Downloads: (external link)
http://arxiv.org/pdf/2605.00614 Latest version (application/pdf)

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:arx:papers:2605.00614

Access Statistics for this paper

More papers in Papers from arXiv.org
Bibliographic data for series maintained by arXiv administrators ().