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Joint LM Test for Homoskedasticity in a One-Way error Component Model

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This paper considers a general heteroskedastic error component model using panel data, and derives a joint LM test for homoskedasticity against the alternative of heteroskedasticity in both error components. It contrasts this joint LM test with marginal LM tests that ignore the heteroskedasticity in one of the error components. Monte Carlo results show that misleading inference can occur when using marginal rather than joint tests when heteroskedasticity is present in both components.

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  • Badi H. Baltagi & Georges Bresson & Alain Pirotte, 2005. "Joint LM Test for Homoskedasticity in a One-Way error Component Model," Center for Policy Research Working Papers 72, Center for Policy Research, Maxwell School, Syracuse University.
    • Handle: RePEc:max:cprwps:72
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    Cited by:

    1. Javier Alejo & Antonio Galvao & Gabriel Montes-Rojas & Walter Sosa-Escudero, 2015. "Tests for normality in linear panel-data models," Stata Journal, StataCorp LP, vol. 15(3), pages 822-832, September.
    2. Kajal Lahiri & Huaming Peng & Xuguang Simon Sheng, 2022. "Measuring Uncertainty of a Combined Forecast and Some Tests for Forecaster Heterogeneity," Advances in Econometrics, in: Essays in Honor of M. Hashem Pesaran: Prediction and Macro Modeling, volume 43, pages 29-50, Emerald Group Publishing Limited.
    3. Baltagi, Badi H. & Jung, Byoung Cheol & Song, Seuck Heun, 2010. "Testing for heteroskedasticity and serial correlation in a random effects panel data model," Journal of Econometrics, Elsevier, vol. 154(2), pages 122-124, February.
    4. Montes-Rojas, Gabriel & Sosa-Escudero, Walter, 2011. "Robust tests for heteroskedasticity in the one-way error components model," Journal of Econometrics, Elsevier, vol. 160(2), pages 300-310, February.
    5. Richard Kouamé Moussa, 2019. "Heteroskedasticity in One-Way Error Component Probit Models," Econometrics, MDPI, vol. 7(3), pages 1-22, August.
    6. Wu, Jianhong, 2020. "A joint test for serial correlation and heteroscedasticity in fixed-T panel regression models with interactive effects," Economics Letters, Elsevier, vol. 197(C).
    7. Juhl, Ted & Sosa-Escudero, Walter, 2014. "Testing for heteroskedasticity in fixed effects models," Journal of Econometrics, Elsevier, vol. 178(P3), pages 484-494.
    8. Georges Bresson & Cheng Hsiao & Alain Pirotte, 2011. "Assessing the contribution of R&D to total factor productivity—a Bayesian approach to account for heterogeneity and heteroskedasticity," AStA Advances in Statistical Analysis, Springer;German Statistical Society, vol. 95(4), pages 435-452, December.
    9. Kouassi, Eugene & Mougoué, Mbodja & Sango, Joel & Bosson Brou, J.M. & Amba, Claude M.O. & Salisu, Afeez Adebare, 2014. "Testing for heteroskedasticity and spatial correlation in a two way random effects model," Computational Statistics & Data Analysis, Elsevier, vol. 70(C), pages 153-171.
    10. Fang, Bin & Ye, Qiang & Law, Rob, 2016. "Effect of sharing economy on tourism industry employment," Annals of Tourism Research, Elsevier, vol. 57(C), pages 264-267.
    11. Bera, Anil K. & Montes-Rojas, Gabriel & Sosa-Escudero, Walter, 2009. "Testing under local misspecification and artificial regressions," Economics Letters, Elsevier, vol. 104(2), pages 66-68, August.
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    13. Chen, Jing & Yue, Rongxian & Wu, Jianhong, 2020. "Testing for individual and time effects in the two-way error component model with time-invariant regressors," Economic Modelling, Elsevier, vol. 92(C), pages 216-229.
    14. Rui Hou & Leiming Li & Bingquan Liu, 2020. "Backers investment behavior on explicit and implicit factors in reward-based crowdfunding based on ELM theory," PLOS ONE, Public Library of Science, vol. 15(8), pages 1-29, August.
    15. Galvao, Antonio F. & Montes-Rojas, Gabriel & Sosa-Escudero, Walter & Wang, Liang, 2013. "Tests for skewness and kurtosis in the one-way error component model," Journal of Multivariate Analysis, Elsevier, vol. 122(C), pages 35-52.
    16. Yue Chen & Wentao Zhang & Xiangbin Yan & Jiahua Jin, 2020. "The life-cycle influence mechanism of the determinants of financing performance: an empirical study of a Chinese crowdfunding platform," Review of Managerial Science, Springer, vol. 14(1), pages 287-309, February.
    17. Peiwen Guo & Jun Fang & Ke Zhu, 2023. "The Spatial Spillover Effect and Function Routes of Transport Infrastructure Investment on Economic Growth: Evidence from Panel Data of OECD Members and Partners," Mathematics, MDPI, vol. 11(5), pages 1-26, February.
    18. Yap, Ghialy, 2013. "The impacts of exchange rates on Australia's domestic and outbound travel markets," Mathematics and Computers in Simulation (MATCOM), Elsevier, vol. 93(C), pages 139-150.
    19. King, Maxwell L. & Zhang, Xibin & Akram, Muhammad, 2020. "Hypothesis testing based on a vector of statistics," Journal of Econometrics, Elsevier, vol. 219(2), pages 425-455.
    20. Wu, Jianhong & Li, Guodong, 2014. "Moment-based tests for individual and time effects in panel data models," Journal of Econometrics, Elsevier, vol. 178(P3), pages 569-581.
    21. Alain Pirotte & Jean-Loup Madre, 2011. "Determinants of Urban Sprawl in France," Urban Studies, Urban Studies Journal Limited, vol. 48(13), pages 2865-2886, October.
    22. Platoni, Silvia & Barbieri, Laura & Moro, Daniele & Sckokai, Paolo, 2020. "Heteroscedastic stratified two-way EC models of single equations and SUR systems," Econometrics and Statistics, Elsevier, vol. 15(C), pages 46-66.
    23. Baltagi, Badi H. & Song, Seuck Heun & Kwon, Jae Hyeok, 2009. "Testing for heteroskedasticity and spatial correlation in a random effects panel data model," Computational Statistics & Data Analysis, Elsevier, vol. 53(8), pages 2897-2922, June.
    24. Bumba Mukherjee & David Andrew Singer, 2010. "International Institutions and Domestic Compensation: The IMF and the Politics of Capital Account Liberalization," American Journal of Political Science, John Wiley & Sons, vol. 54(1), pages 45-60, January.

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    More about this item

    Keywords

    panel data; heteroskedasticity; Lagrange multiplier tests; error components; Monte Carlo simulations;
    All these keywords.

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models

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