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Aggregation of linear models for panel data

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  • Alexandre Petkovic
  • David Veredas

Abstract

We study the impact of individual and temporal aggregation in linear static and dy- namic models for panel data in terms of model specification and efficiency of the estimated parameters. Model wise we find that i) individual aggregation does not affect the model structure but temporal aggregation may introduce residual autocorrelation, and ii) individual aggregation entails heteroskedasticity while temporal aggregation does not. Estimation wise we find that i) in the static model, estimation by least squares with the aggregated data entails a decrease in the efficiency of the estimated parameters but we cannot rank different aggregation schemes in terms of efficiency, and ii) in the dynamic model, estimation by GMM does not necessarily entail a decrease in the efficiency of the estimated parameters under individual aggregation and no analytic comparison can be established for temporal aggregation, though simulations suggests that temporal aggregation deteriorates the accuracy of the estimates.

Suggested Citation

  • Alexandre Petkovic & David Veredas, 2009. "Aggregation of linear models for panel data," Working Papers ECARES 2009-012, ULB -- Universite Libre de Bruxelles.
    • Handle: RePEc:eca:wpaper:2013/230744
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    1. Drost, Feike C & Nijman, Theo E, 1993. "Temporal Aggregation of GARCH Processes," Econometrica, Econometric Society, vol. 61(4), pages 909-927, July.
    2. Andrea Silvestrini & David Veredas, 2008. "Temporal Aggregation Of Univariate And Multivariate Time Series Models: A Survey," Journal of Economic Surveys, Wiley Blackwell, vol. 22(3), pages 458-497, July.
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    Cited by:

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    3. Kurz, Michael & Kleimeier, Stefanie, 2019. "Credit Supply: Are there negative spillovers from banks’ proprietary trading?," Research Memorandum 005, Maastricht University, Graduate School of Business and Economics (GSBE).

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    More about this item

    Keywords

    panel data; temporal aggregation; model specification; efficiency;
    All these keywords.

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
    • C52 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Evaluation, Validation, and Selection

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