## Job market paper

**The incidental parameters problem in testing for remaining cross-section correlation.**(with A. Juodis)

In this paper we consider the properties of the Pesaran (2004, 2015) CD test for cross-section correlation when applied to residuals obtained from panel data models with many estimated parameters. We show that the presence of period-specific parameters leads the CD test statistic to diverge as the length of the time dimension of the sample grows. This result holds even if cross-section dependence is correctly accounted for and hence constitutes an example of the Incidental Parameters Problem. The relevance of this problem is investigated both for the classical Time Fixed Effects estimator as well as the Common Correlated Effects estimator of Pesaran (2006). We discuss approaches for re-establishing standard normal inference under the null hypothesis. Given the widespread use of the CD test statistic to test for remaining cross-section correlation, our results have far reaching implications for empirical researchers.

## Publications

**Estimation of factor-augmented panel regressions with weakly influential factors**, with Joakim Westerlund,

*Econometric Reviews,*37(5), pp. 401-465, 2018.

**Identifiability issue of age-period and age-period-cohort models of the Lee-Carter type**, with Eric Beutner and Jean-Pierre Urbain.

*Insurance: Mathematics and Economics*75, pp. 117-125, July 2017.

**A factor analytical approach to price discovery**, with Joakim Westerlund and Paresh Narayan

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*Oxford Bulletin of Economics and Statistics*97(3), pp. 366-394, June 2017.

**On the role of of the rank condition in CCE estimation of factor-augmented panel regressions**, with Hande Karabiyik and Joakim Westerlund

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*Journal of Econometrics*197(1), pp. 60-64, March 2017

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PANICCA - PANIC on cross-section averages, with Joakim Westerlund,

PANICCA - PANIC on cross-section averages

*Journal of Applied Econometrics*31(6), pp. 961-981 September/October 2016.

**Testing for structural breaks in the presence of data perturbations: impacts and wavelet-based improvements**, with Yushu Li,

*Journal of Statistical Computation and Simulation*, 85(17), pp.3478-3479, 2015.

**Wavelet improvement in turning point detection using a hidden Markov model:from the aspects of cyclical identification and outlier correction**, with Yushu Li,

*Computational Statistics,*29(6), pp. 1481-1496, December 2014.

## Work in progress

**A residual-based threshold method for detection of units that are too big to fail in large factor models**, with G. Kapetanios and M.H. Pesaran, USC-INET Research Paper No. 18-23.

**A Hausman test for cross-section dependence in linear panel regression models.**

**Asymptotic inference in the Lee-Carter model for modelling mortality rates.**