A heteroskedasticity robust test for cross-sectional correlation in a fixed effects panel data model

Peng Bin (), Junqi Yu and Yi Zhu

Economics Letters, 2021, vol. 201, issue C

Abstract: This paper proposes a new test for detecting no cross-sectional correlation in a fixed effects panel data model. The newly proposed test is allowing for the heteroscedastic variances across time. It shows that if the error terms have zero skewness, the new test converges to a standard normal distribution as (n,T)→∞ with n∕T→c∈(0,∞); if the skewness of the error terms is nonzero and finite, the test converges to a standard normal distribution as (n,T)→∞ with n2∕T→0. Besides, the paper conducts Monte Carlo simulations for studying the finite sample properties, and the results verify our theoretical findings.

Keywords: Heteroskedasticity; Cross-sectional correlation test; Fixed effects; Panel data (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecolet:v:201:y:2021:i:c:s0165176521000768

DOI: 10.1016/j.econlet.2021.109799

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