TY  - JOUR
AU  - Petersen,Mitchell A.
TI  - Estimating Standard Errors in Finance Panel Data Sets: Comparing Approaches
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 11280
PY  - 2005
Y2  - April 2005
UR  - http://www.nber.org/papers/w11280
L1  - http://www.nber.org/papers/w11280.pdf
N1  - Author contact info:
Mitchell A. Petersen
Kellogg School of Management
Northwestern University
2001 Sheridan Road
Evanston, IL  60208
Tel: 847/467-1281
Fax: 847/491-5719
E-Mail: mpetersen@northwestern.edu
AB  - In both corporate finance and asset pricing empirical work, researchers are often confronted with panel data. In these data sets, the residuals may be correlated across firms and across time, and OLS standard errors can be biased. Historically, the two literatures have used different solutions to this problem. Corporate finance has relied on Rogers standard errors, while asset pricing has used the Fama-MacBeth procedure to estimate standard errors. This paper will examine the different methods used in the literature and explain when the different methods yield the same (and correct) standard errors and when they diverge. The intent is to provide intuition as to why the different approaches sometimes give different answers and give researchers guidance for their use.
ER  -