Panel quantile regression for extreme risk
Hou, Yanxi; Leng, Xuan; Peng, Liang; Zhou, Yinggang
JOURNAL OF ECONOMETRICS Year: 2024 Volume: 240.0
DOI: 10.1016/j.jeconom.2024.105674
Abstract: This paper introduces a dynamic panel data quantile regression model with network-linked fixed effects, named DQR-NFE, in which unobserved individual heterogeneity is structured through an underlying network. The corresponding estimator is derived by incorporating a quantile network cohesion (QNC) penalty into the dynamic panel quantile regression framework. This penalty encourages connected units within the network to exhibit similar conditional quantiles, with a particularly increased capacity to capture tail network dependence. Relative to conventional fixed-effects specifications, the proposed framework improves the estimation of unobserved heterogeneity and enables more accurate prediction in cold-start settings where training data are unavailable. We establish the consistency and asymptotic normality of the DQR-NFE estimators within a general nonlinear structural framework. These theoretical guarantees hold under both correctly specified and misspecified network structures, with an explicit characterization of their dependence on the network topology. Simulation studies and empirical applications reveal that the proposed estimator outperforms competing approaches in terms of both estimation accuracy and out-of-sample forecasting.
