Existing econometric approaches for studying price discovery presume that the number of markets are small, and their properties become suspect when this restriction is not met. They also require making identifying restrictions and are in many cases not suitable for statistical inference. The...

The cross-section average (CA) augmentation approach of Pesaran (2007) and Pesaran et al. (2013), and the principal components-based panel analysis of non-stationarity in idiosyncratic and common components (PANIC) of Bai and Ng (2004, 2010) are among the most popular “second-generation”...

The use of factor-augmented panel regressions has become very popular in recent years. Existing methods for such regressions require that the common factors are strong, such that their cumulative loadings rise proportionally to the number of cross-sectional units, which of course need not be the...