United we stand, divided we fall: A PANICCA test evidence for stock exchanges in OECD

Afees Salisu

No 49, Working Papers from Centre for Econometric and Allied Research, University of Ibadan

Abstract: This study offers a new evidence for the nonstationary behavior of OECD stock prices using the PANICCA test of Reese and Westerlund (2016) which is a combined approach of the Principal Components-based Panel analysis of Nonstationarity in Idiosyncratic and Common components (PANIC) of Bai and Ng (2004, 2010) and the Cross-section Average (CA) of Pesaran (2007) and Pesaran et al. (2013). The results suggest that the nonstationarity evident in OECD stock prices is largely driven by idiosyncratic components while the common factors are stationary. More importantly, it is found that ignoring relevant covariates in the common factor model may lead to wrong conclusions.

Keywords: Panel unit root; PANICCA; Stock exchanges; OECD (search for similar items in EconPapers)
JEL-codes: C12 C23 C33 G12 G23 (search for similar items in EconPapers)
Pages: 12 pages
Date: 2018-03
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Journal Article: United we stand, divided we fall: A PANICCA test evidence for stock exchanges in OECD (2019)
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