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Estimating Standard Errors in Finance Panel Data Sets: Comparing Approaches

Estimating Standard Errors in Finance Panel Data Sets: Comparing Approaches In 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 or across time, and OLS standard errors can be biased. Historically, researchers in the two literatures have used different solutions to this problem. This paper examines the different methods used in the literature and explains 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. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png The Review of Financial Studies Oxford University Press

Estimating Standard Errors in Finance Panel Data Sets: Comparing Approaches

The Review of Financial Studies , Volume 22 (1) – Jan 3, 2009

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Publisher
Oxford University Press
Copyright
© The Author 2008. Published by Oxford University Press on behalf of The Society for Financial Studies. All rights reserved. For Permissions, please email: journals.permissions@oxfordjournals.org
Subject
Articles
ISSN
0893-9454
eISSN
1465-7368
DOI
10.1093/rfs/hhn053
Publisher site
See Article on Publisher Site

Abstract

In 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 or across time, and OLS standard errors can be biased. Historically, researchers in the two literatures have used different solutions to this problem. This paper examines the different methods used in the literature and explains 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.

Journal

The Review of Financial StudiesOxford University Press

Published: Jan 3, 2009

Keywords: JEL Classification G12 G3 C01 C15

There are no references for this article.