Asset Details
Do you wish to reserve the book?
Common Errors: How to (and Not to) Control for Unobserved Heterogeneity
Hey, we have placed the reservation for you!
By the way, why not check out events that you can attend while you pick your title.
Oops! Something went wrong.
Looks like we were not able to place the reservation. Kindly try again later.
Are you sure you want to remove the book from the shelf?
Common Errors: How to (and Not to) Control for Unobserved Heterogeneity
Do you wish to request the book?
Common Errors: How to (and Not to) Control for Unobserved Heterogeneity
Please be aware that the book you have requested cannot be checked out. If you would like to checkout this book, you can reserve another copy
We have requested the book for you!
Your request is successful and it will be processed during the Library working hours. Please check the status of your request in My Requests.
Oops! Something went wrong.
Looks like we were not able to place your request. Kindly try again later.
Journal Article
Common Errors: How to (and Not to) Control for Unobserved Heterogeneity
2014
Overview
Controlling for unobserved heterogeneity (or \"common errors\"), such as industry-specific shocks, is a fundamental challenge in empirical research. This paper discusses the limitations of two approaches widely used in corporate finance and asset pricing research: demeaning the dependent variable with respect to the group (e.g., \"industry-adjusting\") and adding the mean of the group's dependent variable as a control. We show that these methods produce inconsistent estimates and can distort inference. In contrast, the fixed effects estimator is consistent and should be used instead. We also explain how to estimate the fixed effects model when traditional methods are computationally infeasible.
Publisher
Oxford University Press,Oxford Publishing Limited (England)
Subject
