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Inference with Dependent Data in Accounting and Finance Applications.

Authors :
CONLEY, T. I. M. O. T. H. Y.
GONÇALVES, S. I. L. V. I. A.
HANSEN, C. H. R. I. S. T. I. A. N.
Source :
Journal of Accounting Research (John Wiley & Sons, Inc.); Sep2018, Vol. 56 Issue 4, p1139-1203, 65p, 7 Charts, 2 Graphs
Publication Year :
2018

Abstract

ABSTRACT: We review developments in conducting inference for model parameters in the presence of intertemporal and cross‐sectional dependence with an emphasis on panel data applications. We review the use of heteroskedasticity and autocorrelation consistent (HAC) standard error estimators, which include the standard clustered and multiway clustered estimators, and discuss alternative sample‐splitting inference procedures, such as the Fama–Macbeth procedure, within this context. We outline pros and cons of the different procedures. We then illustrate the properties of the discussed procedures within a simulation experiment designed to mimic the type of firm‐level panel data that might be encountered in accounting and finance applications. Our conclusion, based on theoretical properties and simulation performance, is that sample‐splitting procedures with suitably chosen splits are the most likely to deliver robust inferential statements with approximately correct coverage properties in the types of large, heterogeneous panels many researchers are likely to face. [ABSTRACT FROM AUTHOR]

Details

Language :
English
ISSN :
00218456
Volume :
56
Issue :
4
Database :
Complementary Index
Journal :
Journal of Accounting Research (John Wiley & Sons, Inc.)
Publication Type :
Academic Journal
Accession number :
131152813
Full Text :
https://doi.org/10.1111/1475-679X.12219