Testing Slope Homogeneity in Quantile Regression Panel Data with an Application to the Cross-Section of Stock Returns*
GALVAO, ANTONIO F; JUHL, TED; MONTES-ROJAS, GABRIEL; OLMO, JOSE
Journal of Financial Econometrics
Oxford University Press
Año: 2017 vol. 16 p. 211 - 211
This article proposes tests for slope homogeneity across individuals in quantile regression fixed effects panel data models. The tests are based on the Swamy statistic. We establish the asymptotic null distribution of the tests under large panels.A prominent advantage of the proposed tests is that they are easy to implement inempirical applications. Monte Carlo experiments show evidence that the tests havegood finite sample performance in terms of size and power. The tests are thenapplied to study the cross-section of firms? excess asset returns using financial data on U.S. firms. The tests allow us to assess, for a given quantile of the distribution ofexcess returns, whether the linear effect of the pricing factors in standard linearasset pricing models is the same across stocks. The results confirm the validity ofthose models for the mean and central quantiles. However, for tail quantiles, theslope homogeneity tests reject the null hypothesis providing empirical evidence of pricing anomalies. This suggests that the effect of firm characteristics on the distributionof excess returns is heterogeneous across stocks during booms and busts.