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Variable selection in panel models with breaks
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DOI：10.1016/j.jeconom.2019.04.033.png)
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Abstract
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We develop a Bayesian approach that performs variable selection in panel regression models affected by breaks. Our approach enables deactivation of pervasive regressors and activation of weak regressors for short periods (regimes). We establish theoretical results on the concentration Properties of the posterior as Well as the rate of convergence for estimating the break dates. Our methodology, is demonstrated in simulations and in an empirical application to firms' choice of capital structure. We find that ignoring breaks can lead to overestimating the number of relevant regressors, but also a failure to activate regressors that are informative only in short-lived regimes. (C) 2019 Elsevier B.V. All rights reserved.
Keywords:
Variable selection
Structural breaks
Panel data
Bayesian analysis
High-dimensional modeling
Firms' choice of capital structure
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