Testing for Sphericity in a Fixed Effects Panel Data Model (Revised July 2009)
This paper proposes a test for sphericity in a fixed effects panel data model. It uses the Random Matrix Theory based approach of Ledoit and Wolf (2002) to test for sphericity of the error terms in a fixed effects panel model with a large number of cross-sectional units and time series observations. Since the errors are unobservable, the residuals from the fixed effects regression are used. The limiting distribution of the proposed test statistic is derived. Additionally, its finite sample properties are examined using Monte Carlo simulations.
|Date of creation:||Jul 2009|
|Date of revision:|
|Contact details of provider:|| Postal: |
Phone: (315) 443-3114
Fax: (315) 443-1081
Web page: http://www.maxwell.syr.edu/cpr.aspx
More information through EDIRC
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.:
- M. Hashem Pesaran, 2006.
"Estimation and Inference in Large Heterogeneous Panels with a Multifactor Error Structure,"
Econometric Society, vol. 74(4), pages 967-1012, 07.
- M. Hashem Pesaran, 2004. "Estimation and Inference in Large Heterogeneous Panels with a Multifactor Error Structure," CESifo Working Paper Series 1331, CESifo Group Munich.
- Badi H. Baltagi & Seuck Heun Song & Won Koh, 2002.
"Testing Panel Data Regression Models with Spatial Error Correlation,"
10th International Conference on Panel Data, Berlin, July 5-6, 2002
B6-4, International Conferences on Panel Data.
- Baltagi, Badi H. & Song, Seuck Heun & Koh, Won, 2003. "Testing panel data regression models with spatial error correlation," Journal of Econometrics, Elsevier, vol. 117(1), pages 123-150, November.
- Lee, Lung-Fei, 2002. "Consistency And Efficiency Of Least Squares Estimation For Mixed Regressive, Spatial Autoregressive Models," Econometric Theory, Cambridge University Press, vol. 18(02), pages 252-277, April.
- Donald W.K. Andrews, 2003.
"Cross-section Regression with Common Shocks,"
Cowles Foundation Discussion Papers
1428, Cowles Foundation for Research in Economics, Yale University.
- Pesaran, M.H. & Ullah, A. & Yamagata. T., 2006.
"A Bias-Adjusted LM Test of Error Cross Section Independence,"
Cambridge Working Papers in Economics
0641, Faculty of Economics, University of Cambridge.
- M. Hashem Pesaran & Aman Ullah & Takashi Yamagata, 2008. "A bias-adjusted LM test of error cross-section independence," Econometrics Journal, Royal Economic Society, vol. 11(1), pages 105-127, 03.
- M. Hashem Pesaran, 2004.
"General Diagnostic Tests for Cross Section Dependence in Panels,"
CESifo Working Paper Series
1229, CESifo Group Munich.
- Pesaran, M.H., 2004. "‘General Diagnostic Tests for Cross Section Dependence in Panels’," Cambridge Working Papers in Economics 0435, Faculty of Economics, University of Cambridge.
- Pesaran, M. Hashem, 2004. "General Diagnostic Tests for Cross Section Dependence in Panels," IZA Discussion Papers 1240, Institute for the Study of Labor (IZA).
- Ng, Serena, 2006. "Testing Cross-Section Correlation in Panel Data Using Spacings," Journal of Business & Economic Statistics, American Statistical Association, vol. 24, pages 12-23, January.
- Ledoit, Olivier & Wolf, Michael, 2004. "A well-conditioned estimator for large-dimensional covariance matrices," Journal of Multivariate Analysis, Elsevier, vol. 88(2), pages 365-411, February.
- Breusch, T S & Pagan, A R, 1980. "The Lagrange Multiplier Test and Its Applications to Model Specification in Econometrics," Review of Economic Studies, Wiley Blackwell, vol. 47(1), pages 239-53, January.
- Birke, Melanie & Dette, Holger, 2005. "A note on testing the covariance matrix for large dimension," Statistics & Probability Letters, Elsevier, vol. 74(3), pages 281-289, October.
When requesting a correction, please mention this item's handle: RePEc:max:cprwps:112. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Kelly Bogart)or (Katrina Wingle)
If references are entirely missing, you can add them using this form.