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Joint LM Test for Homoskedasticity in a One-Way error Component Model

Badi Baltagi (), Georges Bresson () and Alain Pirotte ()
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Alain Pirotte: ERMES (CNRS), Universite Pantheon-Assas Paris II, 12 place du Pantheon, 75 230 Paris Cedex 05, France

No 72, Center for Policy Research Working Papers from Center for Policy Research, Maxwell School, Syracuse University

Abstract: This paper considers a general heteroskedastic error component model using panel data, and derives a joint LM test for homoskedasticity against the alternative of heteroskedasticity in both error components. It contrasts this joint LM test with marginal LM tests that ignore the heteroskedasticity in one of the error components. Monte Carlo results show that misleading inference can occur when using marginal rather than joint tests when heteroskedasticity is present in both components.

Keywords: panel data; heteroskedasticity; Lagrange multiplier tests; error components; Monte Carlo simulations (search for similar items in EconPapers)
JEL-codes: C23 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ecm
Date: 2005-10
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Journal Article: Joint LM test for homoskedasticity in a one-way error component model (2006) Downloads
Working Paper: Joint LM test for homoskedasticity in a one-way error component model (2004) Downloads
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Persistent link: https://EconPapers.repec.org/RePEc:max:cprwps:72

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