Testing for cross-sectional dependence in a panel factor model using the wild bootstrap F test

Badi H. Baltagi, Chihwa Kao, Sanggon Na

Research output: Contribution to journalArticle

4 Scopus citations

Abstract

This paper considers testing for cross-sectional dependence in a panel factor model. Based on the model considered by Bai (Econometrica 71: 135-171, 2003), we investigate the use of a simple F test for testing for cross-sectional dependence when the factor may be known or unknown. The limiting distributions of these F test statistics are derived when the cross-sectional dimension and the time-series dimension are both large. The main contribution of this paper is to propose a wild bootstrap F test which is shown to be consistent and which performs well in Monte Carlo simulations especially when the factor is unknown.

Original languageEnglish (US)
Pages (from-to)1067-1094
Number of pages28
JournalStatistical Papers
Volume54
Issue number4
DOIs
StatePublished - Nov 1 2013

Keywords

  • Cross-sectional dependence
  • F test
  • Panel factor model
  • Wild bootstrap

ASJC Scopus subject areas

  • Statistics and Probability
  • Statistics, Probability and Uncertainty

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