Monte Carlo studies have shown that estimated asymptotic standard errors of the efficient two-step generalised method of moments (GMM) estimator can be severely downward biased in small samples. The weight matrix used in the calculation of the efficient two-step GMM estimator is based on initial...

Moment conditions are derived for dynamic linear panel data models with linear individual specific effects in the mean and multiplicative individual effects in the conditional ARCH type variance function. The relation and correlation between the linear and multiplicative effects are...