Model selection for panel data models with fixed effects: a simulation study
Model selection for panel data models with fixed effects: a simulation study
This study considers model selection criteria, such as the Akaike’s Information Criterion (AIC), the corrected Akaike’s Information Criterion (AIC C) and the Bayesian Information Criterion (BIC), for panel data models with fixed effects. Applying these information criteria to fixed effects panel models is not a trivial matter due to the incidental parameter problem that might adversely affect their practical performance, especially when it comes to short panel data. Monte Carlo experiments suggest that the information criteria are quite successful in selecting the true model. In particular, the AIC C and the AIC operate successfully unless a time dimension is extremely small.
Yum, Minchul
23e96e8e-0dbd-4b6a-b3d1-538ab7d008b4
11 November 2022
Yum, Minchul
23e96e8e-0dbd-4b6a-b3d1-538ab7d008b4
Yum, Minchul
(2022)
Model selection for panel data models with fixed effects: a simulation study.
Applied Economics Letters, 29 (19).
(doi:10.1080/13504851.2021.1962505).
Abstract
This study considers model selection criteria, such as the Akaike’s Information Criterion (AIC), the corrected Akaike’s Information Criterion (AIC C) and the Bayesian Information Criterion (BIC), for panel data models with fixed effects. Applying these information criteria to fixed effects panel models is not a trivial matter due to the incidental parameter problem that might adversely affect their practical performance, especially when it comes to short panel data. Monte Carlo experiments suggest that the information criteria are quite successful in selecting the true model. In particular, the AIC C and the AIC operate successfully unless a time dimension is extremely small.
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Accepted/In Press date: 20 July 2021
e-pub ahead of print date: 23 August 2021
Published date: 11 November 2022
Identifiers
Local EPrints ID: 474056
URI: http://eprints.soton.ac.uk/id/eprint/474056
ISSN: 1350-4851
PURE UUID: f34d74de-85cd-4d95-a938-64eaadecfecc
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Date deposited: 10 Feb 2023 17:32
Last modified: 17 Mar 2024 04:18
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Author:
Minchul Yum
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