Joint LM test for homoskedasticity in a one-way error component model

Badi H. Baltagi; Georges Bresson; Alain Pirotte

doi:10.1016/j.jeconom.2005.06.029

Joint LM test for homoskedasticity in a one-way error component model

Badi H. Baltagi, Georges Bresson, Alain Pirotte

Department of Economics

Research output: Contribution to journal › Article › peer-review

34 Scopus citations

Abstract

This paper considers a general heteroskedastic error component model using panel data, and derives a joint Lagrange multiplier (LM) test for homoskedasticity against the alternative of heteroskedasticity in both error components. It contrasts this joint LM test with marginal LM tests that ignore the heteroskedasticity in one of the error components. Monte Carlo results show that misleading inference can occur when using marginal rather than joint tests when heteroskedasticity is present in both components.

Original language	English (US)
Pages (from-to)	401-417
Number of pages	17
Journal	Journal of Econometrics
Volume	134
Issue number	2
DOIs	https://doi.org/10.1016/j.jeconom.2005.06.029
State	Published - Oct 2006

Keywords

Error components
Heteroskedasticity
Lagrange multiplier tests
Monte Carlo simulations
Panel data

ASJC Scopus subject areas

Economics and Econometrics

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10.1016/j.jeconom.2005.06.029

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AB - This paper considers a general heteroskedastic error component model using panel data, and derives a joint Lagrange multiplier (LM) test for homoskedasticity against the alternative of heteroskedasticity in both error components. It contrasts this joint LM test with marginal LM tests that ignore the heteroskedasticity in one of the error components. Monte Carlo results show that misleading inference can occur when using marginal rather than joint tests when heteroskedasticity is present in both components.

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KW - Heteroskedasticity

KW - Lagrange multiplier tests

KW - Monte Carlo simulations

KW - Panel data

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Joint LM test for homoskedasticity in a one-way error component model

Abstract

Keywords

ASJC Scopus subject areas

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