Estimating cointegrated panels with common factors and the forward rate unbiasedness hypothesis

Westerlund, Joakim 2007, Estimating cointegrated panels with common factors and the forward rate unbiasedness hypothesis, Journal of financial econometrics, vol. 5, no. 3, pp. 491-522, doi: 10.1093/jjfinec/nbm006.

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Title Estimating cointegrated panels with common factors and the forward rate unbiasedness hypothesis
Author(s) Westerlund, JoakimORCID iD for Westerlund, Joakim orcid.org/0000-0002-8030-5706
Journal name Journal of financial econometrics
Volume number 5
Issue number 3
Start page 491
End page 522
Total pages 32
Publisher Oxford University Press
Place of publication Oxford, Eng.
Publication date 2007
ISSN 1479-8409
1479-8417
Keyword(s) Common factor model
Cross-section dependence
Forward rate unbiasedness hypothesis
Information criteria
Panel cointegration
Social Sciences
Business, Finance
Economics
Business & Economics
EXCHANGE
REGRESSIONS
EFFICIENCY
BOOTSTRAP
INFERENCE
MARKETS
TESTS
Summary This article proposes a bias-adjusted estimator for use in cointegrated panel regressions when the errors are cross-sectionally correlated through an unknown common factor structure. The asymptotic distribution of the new estimator is derived and is examined in small samples using Monte Carlo simulations. For the estimation of the number of factors, several information-based criteria are considered. The simulation results suggest that the new estimator performs well in comparison to existing ones. In our empirical application, we provide new evidence suggesting that the forward rate unbiasedness hypothesis cannot be rejected. © The Author 2007.
Language eng
DOI 10.1093/jjfinec/nbm006
Field of Research 150202 Financial Econometrics
Socio Economic Objective 919999 Economic Framework not elsewhere classified
HERDC Research category C1.1 Refereed article in a scholarly journal
Copyright notice ©2007, Oxford University Press
Persistent URL http://hdl.handle.net/10536/DRO/DU:30078222

Document type: Journal Article
Collections: Faculty of Business and Law
Deakin Business School
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