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Abstract Details

Activity Number: 472
Type: Contributed
Date/Time: Wednesday, August 1, 2012 : 8:30 AM to 10:20 AM
Sponsor: Business and Economic Statistics Section
Abstract - #305135
Title: Moment-Based Tests for Random Effects in Panel Data Models
Author(s): Guodong Li*+
Companies: The University of Hong Kong
Address: Dept of Statistics and Acturial Science, Hong Kong, , Hong Kong
Keywords: Estimation of moment ; Panel data model ; Test for random effect

This paper proposes two simple one-sided tests for random effects in the two-way error component regressive model. They are based on the estimated higher order moments of the idiosyncratic error, and enjoy three advantages, simplicity, robustness to the presence of the other random effect and robustness to the assumption of Gaussian, comparing with the commonly used tests. These two tests are motivated by the classical Hausman's specification test, however, enjoy some novel properties. The asymptotic distributions of the test statistics are derived under the null hypothesis, and these two tests are shown to be non-trivial. This paper also derives the asymptotic normalities of the estimated higher order moments of the individual effect and the idiosyncratic error. The simulation results show that the proposed two tests have comparable performance with the likelihood-based tests. A real example is also illustrated to demonstrate their usefulness.

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