I have a question regarding the use of the Fama-MacBeth (1973) procedure on panel data.

I am investigating the cross sectional determinants of expected REIT return following the procedure from: Chui, A. C., Titman, S., & Wei, K. C. (2003a). The cross section of expected REIT returns. Real Estate Economics, 31, 451-479.

The equation I am investigating is as follows:

enter image description here

I am aware that the Fama MacBeth procedure accounts for cross correlation between variables but not for time series/ auto correlation.

However, in my equation I introduce past returns (momentum) as one of the cross sectional determinants: enter image description here

Now my question is as follows:

By introducing past returns, should I also account for time series correlation for instance by performing the Newey and West (1987) correction for serial correlation and heteroskedastcity?

Thank you in advance for your help and if anything is unclear I will gladly explain.

Kind regards,

Spike Gontscharoff


Your Answer

By clicking "Post Your Answer", you acknowledge that you have read our updated terms of service, privacy policy and cookie policy, and that your continued use of the website is subject to these policies.

Browse other questions tagged or ask your own question.