A simple new test for slope homogeneity in panel data models with interactive effects

Tomohiro Ando; Jushan Bai

doi:10.1016/j.econlet.2015.09.019

A simple new test for slope homogeneity in panel data models with interactive effects

Tomohiro Ando, Jushan Bai

Graduate School of Business Administration

Research output: Contribution to journal › Article › peer-review

10 Citations (Scopus)

Abstract

We consider the problem of testing for slope homogeneity in high-dimensional panel data models with a factor error structure. We consider the Swamy-type test for slope homogeneity by incorporating interactive fixed effects. We show that the proposed test statistic is asymptotically normal. Our test allows the explanatory variables to be correlated with the unobserved factors, factor loadings, or with both. Monte Carlo simulations demonstrate that the proposed test has good size control and good power.

Original language	English
Pages (from-to)	112-117
Number of pages	6
Journal	Economics Letters
Volume	136
DOIs	https://doi.org/10.1016/j.econlet.2015.09.019
Publication status	Published - 2015 Nov 1

Keywords

Cross-sectional dependence
Endogenous regressors
Slope homogeneity

ASJC Scopus subject areas

Finance
Economics and Econometrics

Access to Document

10.1016/j.econlet.2015.09.019

Cite this

@article{8f451e4041d54204bd2c68e24a8dc7f7,

title = "A simple new test for slope homogeneity in panel data models with interactive effects",

abstract = "We consider the problem of testing for slope homogeneity in high-dimensional panel data models with a factor error structure. We consider the Swamy-type test for slope homogeneity by incorporating interactive fixed effects. We show that the proposed test statistic is asymptotically normal. Our test allows the explanatory variables to be correlated with the unobserved factors, factor loadings, or with both. Monte Carlo simulations demonstrate that the proposed test has good size control and good power.",

keywords = "Cross-sectional dependence, Endogenous regressors, Slope homogeneity",

author = "Tomohiro Ando and Jushan Bai",

note = "Funding Information: Ando{\textquoteright}s research is partially supported by the Trust Companies Association of Japan . Bai{\textquoteright}s research is partially supported by the NSF grant SES1357598 . Publisher Copyright: {\textcopyright} 2015.",

year = "2015",

month = nov,

day = "1",

doi = "10.1016/j.econlet.2015.09.019",

language = "English",

volume = "136",

pages = "112--117",

journal = "Economics Letters",

issn = "0165-1765",

publisher = "Elsevier",

}

TY - JOUR

T1 - A simple new test for slope homogeneity in panel data models with interactive effects

AU - Ando, Tomohiro

AU - Bai, Jushan

N1 - Funding Information: Ando’s research is partially supported by the Trust Companies Association of Japan . Bai’s research is partially supported by the NSF grant SES1357598 . Publisher Copyright: © 2015.

PY - 2015/11/1

Y1 - 2015/11/1

N2 - We consider the problem of testing for slope homogeneity in high-dimensional panel data models with a factor error structure. We consider the Swamy-type test for slope homogeneity by incorporating interactive fixed effects. We show that the proposed test statistic is asymptotically normal. Our test allows the explanatory variables to be correlated with the unobserved factors, factor loadings, or with both. Monte Carlo simulations demonstrate that the proposed test has good size control and good power.

AB - We consider the problem of testing for slope homogeneity in high-dimensional panel data models with a factor error structure. We consider the Swamy-type test for slope homogeneity by incorporating interactive fixed effects. We show that the proposed test statistic is asymptotically normal. Our test allows the explanatory variables to be correlated with the unobserved factors, factor loadings, or with both. Monte Carlo simulations demonstrate that the proposed test has good size control and good power.

KW - Cross-sectional dependence

KW - Endogenous regressors

KW - Slope homogeneity

UR - http://www.scopus.com/inward/record.url?scp=84943540478&partnerID=8YFLogxK

UR - http://www.scopus.com/inward/citedby.url?scp=84943540478&partnerID=8YFLogxK

U2 - 10.1016/j.econlet.2015.09.019

DO - 10.1016/j.econlet.2015.09.019

M3 - Article

AN - SCOPUS:84943540478

SN - 0165-1765

VL - 136

SP - 112

EP - 117

JO - Economics Letters

JF - Economics Letters

ER -

A simple new test for slope homogeneity in panel data models with interactive effects

Abstract

Keywords

ASJC Scopus subject areas

Access to Document

Other files and links

Fingerprint

Cite this