Testing for Sphericity in a Fixed Effects Panel Data Model (Revised July 2009)

Author(s)/Creator(s)

Badi H. Baltagi, Syracuse University. Center for Policy ResearchFollow
Qu Feng, Nanyang Technological University, Division of Economics.
Chihwa Kao, Syracuse University, Center for Policy Research.Follow

Description/Abstract

This paper proposes a test for sphericity in a fixed effects panel data model. It uses the Random Matrix Theory based approach of Ledoit and Wolf (2002) to test for sphericity of the error terms in a fixed effects panel model with a large number of cross-sectional units and time series observations. Since the errors are unobservable, the residuals from the fixed effects regression are used. The limiting distribution of the proposed test statistic is derived. Additionally, its finite sample properties are examined using Monte Carlo simulations.

Document Type

Working Paper

Date

2009

Keywords

Sphericity, panel data, cross-sectional dependence, John test

Language

English

Series

Working Papers Series

Disciplines

Statistics and Probability

Additional Information

Working paper no. 112

Harvest from RePEc at http://repec.org

Recommended Citation

Baltagi, Badi H.; Feng, Qu; and Kao, Chihwa, "Testing for Sphericity in a Fixed Effects Panel Data Model (Revised July 2009)" (2009). Center for Policy Research. 54.
https://surface.syr.edu/cpr/54

Source

Metadata from RePEc

Creative Commons License

This work is licensed under a Creative Commons Attribution 3.0 License.