Harold D Chiang, Bruce E Hansen, Yuya Sasaki
arXiv 27 Jan 2022 · Econometrics · publishedThe Review of Economics and Statistics (2024) · 17 citations (OpenAlex)
arXiv:2201.11304 · PDF · DOI · OpenAlex · Extracted main text
We propose improved standard errors and an asymptotic distribution theory for two-way clustered panels. Our proposed estimator and theory allow for arbitrary serial dependence in the common time effects, which is excluded by existing two-way methods, including the popular two-way cluster standard errors of Cameron, Gelbach, and Miller (2011) and the cluster bootstrap of Menzel (2021). Our asymptotic distribution theory is the first which allows for this level of inter-dependence among the observations. Under weak regularity conditions, we demonstrate that the least squares estimator is asymptotically normal, our proposed variance estimator is consistent, and t-ratios are asymptotically standard normal, permitting conventional inference. We present simulation evidence that confidence intervals constructed with our proposed standard errors obtain superior coverage performance relative to existing methods. We illustrate the relevance of the proposed method in an empirical application to a standard Fama-French three-factor regression.
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The works this paper leans on most, across its whole bibliography — not restricted to papers in our corpus. Ranked by composite intensity, which combines how often a work is mentioned, how many sections mention it, and how much of that falls in the main text rather than the appendix.
| Reference | Intensity | Mentions | Sections | Main text | |
|---|---|---|---|---|---|
| 1 | Menzel, K (2021) Bootstrap with cluster-dependence in two or more dimensions | 1.000 | 13 | 7 | 100% |
| 2 | Thompson, S. B (2011) Simple formulas for standard errors that cluster by both firm and time | 1.000 | 13 | 4 | 100% |
| 3 | Cameron, C. A., J. B. Gelbach, and D. L. Miller (2011) Robust inference with multiway clustering | 1.000 | 10 | 5 | 100% |
| 4 | Davezies, L., X. D'Haultfuille, and Y. Guyonvarch (2021) Empirical process results for exchangeable arrays | 1.000 | 6 | 3 | 100% |
| 5 | MacKinnon, J. G., M. . Nielsen, and M. D. Webb (2021) Wild bootstrap and asymptotic inference with multiway clustering | 1.000 | 6 | 3 | 100% |
| 6 | Newey, W. K. and K. D. West (1987) A simple, positive semi-definite, heteroskedasticity and autocorrelationconsistent covariance matrix | 0.811 | 4 | 2 | 100% |
| 7 | Yoshihara, K.-i (1976) Limiting behavior of U-statistics for stationary, absolutely regular processes | 0.693 | 9 | 3 | 33% |
| 8 | Bloom, N., M. Schankerman, and J. Van Reenen (2013) Identifying technology spillovers and product market rivalry | 0.644 | 4 | 2 | 50% |
| 9 | Andrews, D. W (1991) Heteroskedasticity and autocorrelation consistent covariance matrix estimation | 0.644 | 2 | 2 | 100% |
| 10 | Hansen, B. E (2022) Econometrics self | 0.523 | 7 | 4 | 14% |
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