Zhenhong Huang, Zhaoyuan Li, Jianfeng Yao
arXiv 28 Feb 2023 · Econometrics
arXiv:2302.14387 · PDF · DOI · OpenAlex · Extracted main text
This paper revisits the Lagrange multiplier type test for the null hypothesis of no cross-sectional dependence in large panel data models. We propose a unified test procedure and its power enhancement version, which show robustness for a wide class of panel model contexts. Specifically, the two procedures are applicable to both heterogeneous and fixed effects panel data models with the presence of weakly exogenous as well as lagged dependent regressors, allowing for a general form of nonnormal error distribution. With the tools from Random Matrix Theory, the asymptotic validity of the test procedures is established under the simultaneous limit scheme where the number of time periods and the number of cross-sectional units go to infinity proportionally. The derived theories are accompanied by detailed Monte Carlo experiments, which confirm the robustness of the two tests and also suggest the validity of the power enhancement technique.
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The works this paper leans on most, across its whole bibliography — not restricted to papers in our corpus. Ranked by composite intensity, which combines how often a work is mentioned, how many sections mention it, and how much of that falls in the main text rather than the appendix.
| Reference | Intensity | Mentions | Sections | Main text | |
|---|---|---|---|---|---|
| 1 | Pesaran, M. H (2004) General diagnostic tests for cross-sectional dependence in panels | 1.000 | 7 | 3 | 100% |
| 2 | Pesaran, M. H., A. Ullah, and T. Yamagata (2008) A bias-adjusted lm test of error cross-section independence | 1.000 | 7 | 3 | 100% |
| 3 | Bailey, N., J. Dandan, and J. Yao (2021) A lagrange-multiplier test for large heterogeneous panel data models | 1.000 | 6 | 4 | 100% |
| 4 | Baltagi, B. H., Q. Feng, and C. Kao (2012) A lagrange multiplier test for cross-sectional dependence in a fixed effects panel data model | 1.000 | 5 | 3 | 100% |
| 5 | Pesaran, M. H (2015) Testing weak cross-sectional dependence in large panels | 0.928 | 4 | 3 | 100% |
| 6 | Bailey, N., G. Kapetanios, and M. H. Pesaran (2016) Exponent of cross-sectional dependence: Estimation and inference | 0.644 | 2 | 2 | 100% |
| 7 | Breusch, T. S. and A. R. Pagan (1980) The lagrange multiplier test and its applications to model specification in econometrics | 0.644 | 2 | 2 | 100% |
| 8 | Halunga, A. G., C. D. Orme, and T. Yamagata (2017) A heteroskedasticity robust breusch–pagan test for contemporaneous correlation in dynamic panel data models | 0.644 | 2 | 2 | 100% |
| 9 | Fan, J., Y. Liao, and J. Yao (2015) Power enhancement in high-dimensional cross-sectional tests | 0.511 | 2 | 1 | 100% |
| 10 | Baltagi, B. H., G. Bresson, and A. Pirotte (2008) To pool or not to pool? | 0.405 | 1 | 1 | 100% |
Showing the top 10 of 27 scored citations.