Standardized LM Tests for Spatial Error Dependence in Linear or Panel Regressions
AbstractThe robustness of the LM tests for spatial error dependence of Burridge (1980) for the linear regression model and Anselin (1988) for the panel regression model are examined. While both tests are asymptotically robust against distributional misspecification, their finite sample behavior can be sensitive to the spatial layout. To overcome this shortcoming, standardized LM tests are suggested. Monte Carlo results show that the new tests possess good finite sample properties. An important observation made throughout this study is that the LM tests for spatial dependence need to be both mean and variance-adjusted for good finite sample performance to be achieved. The former is, however, often neglected in the literature.
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Bibliographic InfoPaper provided by Singapore Management University, School of Economics in its series Working Papers with number 11-2010.
Length: 25 pages
Date of creation: Sep 2010
Date of revision:
Publication status: Published in SMU Economics and Statistics Working Paper Series
Other versions of this item:
- Badi H. Baltagi & Zhenlin Yang, 2013. "Standardized LM tests for spatial error dependence in linear or panel regressions," Econometrics Journal, Royal Economic Society, vol. 16(1), pages 103-134, 02.
- Badi H. Baltagi & Zhenlin Yang, 2012. "Standardized LM Tests for Spatial Error Dependence in Linear or Panel Regressions," Center for Policy Research Working Papers 142, Center for Policy Research, Maxwell School, Syracuse University.
- C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Longitudinal Data; Spatial Time Series
- C5 - Mathematical and Quantitative Methods - - Econometric Modeling
This paper has been announced in the following NEP Reports:
- NEP-ALL-2010-11-27 (All new papers)
- NEP-ECM-2010-11-27 (Econometrics)
- NEP-SEA-2010-11-27 (South East Asia)
- NEP-URE-2010-11-27 (Urban & Real Estate Economics)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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