A Heteroskedasticity-Robust F -Test Statistic for Individual Effects

Chris Orme () and Takashi Yamagata

Econometric Reviews, 2014, vol. 33, issue 5-6, 431-471

Abstract: We derive the asymptotic distribution of the standard F-test statistic for fixed effects, in static linear panel data models, under both non-normality and heteroskedasticity of the error terms, when the cross-section dimension is large but the time series dimension is fixed. It is shown that a simple linear transformation of the F-test statistic yields asymptotically valid inferences and under local fixed (or correlated) individual effects, this heteroskedasticity-robust F-test enjoys higher asymptotic power than a suitably robustified Random Effects test. Wild bootstrap versions of these tests are considered which, in a Monte Carlo study, provide more reliable inference in finite samples.

Date: 2014
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Working Paper: A Heteroskedasticity-Robust F-Test Statistic for Individual Effects (2011)
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DOI: 10.1080/07474938.2013.824792

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