Testing for heteroskedasticity and serial correlation in a random effects panel data model

Badi H. Baltagi, Byoung Cheol Jung, Seuck Heun Song

Research output: Contribution to journalArticle

21 Scopus citations

Abstract

This paper considers a panel data regression model with heteroskedastic as well as serially correlated disturbances, and derives a joint LM test for homoskedasticity and no first order serial correlation. The restricted model is the standard random individual error component model. It also derives a conditional LM test for homoskedasticity given serial correlation, as well as, a conditional LM test for no first order serial correlation given heteroskedasticity, all in the context of a random effects panel data model. Monte Carlo results show that these tests along with their likelihood ratio alternatives have good size and power under various forms of heteroskedasticity including exponential and quadratic functional forms.

Original languageEnglish (US)
Pages (from-to)122-124
Number of pages3
JournalJournal of Econometrics
Volume154
Issue number2
DOIs
StatePublished - Feb 2010

Keywords

  • Heteroskedasticity
  • Lagrange multiplier tests
  • Likelihood ratio
  • Panel data
  • Random effects
  • Serial correlation

ASJC Scopus subject areas

  • Economics and Econometrics

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