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Journal of Econometric Methods

Ed. by Giacomini, Raffaella / Li, Tong


Mathematical Citation Quotient (MCQ) 2018: 0.06

Online
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2156-6674
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Exponential Regression of Fractional-Response Fixed-Effects Models with an Application to Firm Capital Structure

Esmeralda A. RamalhoORCID iD: http://orcid.org/0000-0002-9525-0082 / Joaquim J.S. RamalhoORCID iD: http://orcid.org/0000-0003-3533-2411 / Luís M.S. Coelho
Published Online: 2016-09-14 | DOI: https://doi.org/10.1515/jem-2015-0019

Abstract

New fixed-effects estimators are proposed for logit and complementary loglog fractional regression models. The standard specifications of these models are transformed into a form of exponential regression with multiplicative individual effects and time-variant heterogeneity, from which four alternative estimators that do not require assumptions on the distribution of the unobservables are proposed. All new estimators are robust to both time-variant and time-invariant heterogeneity and can accomodate fractional responses with observations at the boundary value of zero. Additionally, some of these estimators can be applied to dynamic panel data models and can accommodate endogenous explanatory variables without requiring the specification of a reduced form model. A Monte Carlo study and an application to firm capital structure choices illustrate the usefulness of the suggested estimators.

This article offers supplementary material which is provided at the end of the article.

Keywords: dynamic models; endogeneity; exponential regression; fixed effects; fractional responses; heterogeneity; panel data

JEL Classification: C25; C23

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About the article

Published Online: 2016-09-14


Citation Information: Journal of Econometric Methods, Volume 7, Issue 1, 20150019, ISSN (Online) 2156-6674, DOI: https://doi.org/10.1515/jem-2015-0019.

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