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Testing for no factor structures: on the use of average-type and Hausman-type statistics

Author

Listed:
  • Carolina Castagnetti

    (Department of Economics and Management, University of Pavia)

  • Eduardo Rossi

    (Department of Economics and Management, University of Pavia)

  • Lorenzo Trapani

    (Faculty of Finance,Cass Business School, City University, London (UK))

Abstract

Castagnetti, Rossi and Trapani (2014) propose two max-type statistics to test for the presence of a factor structure in a large stationary panel data model. We investigate the use of alternative approaches as average-type and Hausman-type statistics. We show that both approaches can not be used. The average-type statistics diverge under the null, while the tests based on the Hausman principle are inconsistent.

Suggested Citation

  • Carolina Castagnetti & Eduardo Rossi & Lorenzo Trapani, 2014. "Testing for no factor structures: on the use of average-type and Hausman-type statistics," DEM Working Papers Series 092, University of Pavia, Department of Economics and Management.
    • Handle: RePEc:pav:demwpp:demwp0092
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    File URL: http://dem-web.unipv.it/web/docs/dipeco/quad/ps/RePEc/pav/demwpp/DEMWP0092.pdf
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    References listed on IDEAS

    as
    1. Castagnetti, Carolina & Rossi, Eduardo & Trapani, Lorenzo, 2015. "Inference on factor structures in heterogeneous panels," Journal of Econometrics, Elsevier, vol. 184(1), pages 145-157.
    2. M. Hashem Pesaran, 2006. "Estimation and Inference in Large Heterogeneous Panels with a Multifactor Error Structure," Econometrica, Econometric Society, vol. 74(4), pages 967-1012, July.
    3. Jushan Bai, 2009. "Panel Data Models With Interactive Fixed Effects," Econometrica, Econometric Society, vol. 77(4), pages 1229-1279, July.
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    Cited by:

    1. Castagnetti, Carolina & Rossi, Eduardo & Trapani, Lorenzo, 2015. "Inference on factor structures in heterogeneous panels," Journal of Econometrics, Elsevier, vol. 184(1), pages 145-157.

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    More about this item

    Keywords

    Large Panels; Testing for Factor Structure; Hausman-type test.;
    All these keywords.

    JEL classification:

    • C12 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Hypothesis Testing: General
    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models

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