A simple wavelet-based test for serial correlation in panel data models
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.
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- Yongmiao Hong & Chihwa Kao, 2000.
"Wavelet-Based Testing for Serial Correlation of Unknown Form in Panel Models,"
Center for Policy Research Working Papers
32, Center for Policy Research, Maxwell School, Syracuse University.
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