Cross-sectional averages versus principal components

J. Westerlund; J.R.Y.J. Urbain

doi:10.1016/j.jeconom.2014.09.014

Cross-sectional averages versus principal components

J. Westerlund^*, J.R.Y.J. Urbain

^*Corresponding author for this work

Quantitative Economics

Research output: Contribution to journal › Article › Academic › peer-review

Abstract

In spite of the increased use of factor-augmented regressions in recent years, little is known regarding the relative merits of the two main approaches to estimation and inference, namely, the cross-sectional average and principal component estimators. By providing a formal comparison of the approaches, the current paper fills this gap in the literature.

Original language	English
Pages (from-to)	372-377
Number of pages	6
Journal	Journal of Econometrics
Volume	185
Issue number	2
Early online date	18 Nov 2014
DOIs	https://doi.org/10.1016/j.jeconom.2014.09.014
Publication status	Published - Apr 2015

Keywords

Factor-augmented panel regressions
Common factor models
Principal components
Cross-section averages
Cross-section dependence
MODELS
PANELS

Access to Document

10.1016/j.jeconom.2014.09.014

Cite this

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title = "Cross-sectional averages versus principal components",

abstract = "In spite of the increased use of factor-augmented regressions in recent years, little is known regarding the relative merits of the two main approaches to estimation and inference, namely, the cross-sectional average and principal component estimators. By providing a formal comparison of the approaches, the current paper fills this gap in the literature.",

keywords = "Factor-augmented panel regressions, Common factor models, Principal components, Cross-section averages, Cross-section dependence, MODELS, PANELS",

author = "J. Westerlund and J.R.Y.J. Urbain",

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AB - In spite of the increased use of factor-augmented regressions in recent years, little is known regarding the relative merits of the two main approaches to estimation and inference, namely, the cross-sectional average and principal component estimators. By providing a formal comparison of the approaches, the current paper fills this gap in the literature.

KW - Factor-augmented panel regressions

KW - Common factor models

KW - Principal components

KW - Cross-section averages

KW - Cross-section dependence

KW - MODELS

KW - PANELS

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DO - 10.1016/j.jeconom.2014.09.014

M3 - Article

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JF - Journal of Econometrics

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