Modeling Panels of Intercorrelated Autoregressive Time Series

We propose a method of modeling panel time series data with both inter-and intra-individual correlation, and of tting an autoregressive model to such data. Estimates are obtained by a conditional likelihood argument. If there are few observations in each series, the estimates can be dramatically improved by Burg-type estimates taking edge eeects into account. The consequences of ignoring the intercorrelation term are analysed. Partial lack of consistency is demonstrated in this situation. Moreover, a break-even point is found for the strength of the intercorrelation, beyond which a conventional estimate, ignoring correlation, will become increasingly inferior. Asymp-totic normality of estimators is established, and our results are illustrated on a real data example, where it is seen that choosing the right type of estimate is of crucial importance.