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A simple wavelet-based test for serial correlation in panel data models

Author

Listed:
  • Li, Yushu

    (Dept. of Business and Management Science, Norwegian School of Economics)

  • Andersson, Fredrik N. G.

    (Dept. of Economics, School of Economics and Management, Lund University)

Abstract

Hong and Kao (2004) proposed a panel data test for serial correlation of unknown form. However, their test is computationally difficult to implement, and simulation studies show the test to have bad small-sample properties. We extend Gencay’s (2011) time series test for serial correlation to the panel data case in the framework proposed by Hong and Kao (2004). Our new test maintains the advantages of the Hong and Kao (2004) test, and it is simpler and easier to implement. Furthermore, simulation results show that our test has quicker convergence and hence better small-sample properties.

Suggested Citation

  • Li, Yushu & Andersson, Fredrik N. G., 2014. "A simple wavelet-based test for serial correlation in panel data models," Discussion Papers 2014/11, Norwegian School of Economics, Department of Business and Management Science.
    • Handle: RePEc:hhs:nhhfms:2014_011
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    File URL: http://hdl.handle.net/11250/194976
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    References listed on IDEAS

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    JEL classification:

    • C11 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Bayesian Analysis: General
    • C12 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Hypothesis Testing: General
    • C15 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Statistical Simulation Methods: General

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