The Davies Problem: A New Test for Random Slope in the Hierarchical Linear Model

Rutger van Oest and Philip Hans Franses

No EI 2015-01, Econometric Institute Research Papers from Erasmus University Rotterdam, Erasmus School of Economics (ESE), Econometric Institute

Abstract: __Abstract__ Crucial inference for the hierarchical linear model concerns the null hypothesis of no random slope. We argue that the usually applied statistical test suffers from the so-called Davies problem, that is, a nuisance parameter is only identified under the alternative. We propose an easy-to-implement methodology that exploits this property. We provide the relevant critical values and demonstrate through simulations that our new methodology has better power properties.

Keywords: hierarchical linear model; random effects; slope variance; Davies problem (search for similar items in EconPapers)
Pages: 18
Date: 2015-01-05
New Economics Papers: this item is included in nep-ecm
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