Testing for heteroskedasticity in two-way fixed effects panel data models

Sanying Feng, Gaorong Li*, Tiejun TONG, Shuanghua Luo

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

Abstract

In this paper, we propose a new method for testing heteroskedasticity in two-way fixed effects panel data models under two important scenarios where the cross-sectional dimension is large and the temporal dimension is either large or fixed. Specifically, we will develop test statistics for both cases under the conditional moment framework, and derive their asymptotic distributions under both the null and alternative hypotheses. The proposed tests are distribution free and can easily be implemented using the simple auxiliary regressions. Simulation studies and two real data analyses demonstrate that our proposed tests perform well in practice, and may have the potential for wide application in econometric models with panel data.

Original languageEnglish
Pages (from-to)91-116
Number of pages26
JournalJournal of Applied Statistics
Volume47
Issue number1
DOIs
Publication statusPublished - 2 Jan 2020

Scopus Subject Areas

  • Statistics and Probability
  • Statistics, Probability and Uncertainty

User-Defined Keywords

  • Asymptotic distribution
  • heteroskedasticity
  • panel data
  • testing
  • two-way fixed effects model

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