Fredrik N G Andersson
Associate professor
A simple wavelet-based test for serial correlation in panel data models
Author
Summary, in English
Hong and Kao (2004) proposed a class of general applicable wavelet-based tests for serial correlation of unknown form in the residuals from a panel regression model. The tests can be applied to both static and dynamic panel models. Their test, however, is computationally difficult to implement, and simulation studies show that the test has poor small-sample properties. In this paper, we extend Gençay’s (2010) time-series test for serial correlation to panel data case. Our new test is also wavelet based and maintains the advantages of the Hong and Kao (2004) test, but it is much simpler and easier to implement. Furthermore, simulation results show that our test has quicker convergence rate and hence better small-sample properties, compared to Hong and Kao (2004) test. We also compare our test with several other existing tests for series correlation, and our test has in general better statistical properties in terms of both size and power.
Department/s
- Department of Economics
Publishing year
2021-05-01
Language
English
Pages
2351-2363
Publication/Series
Empirical Economics
Volume
60
Issue
5
Document type
Journal article
Publisher
Physica Verlag
Topic
- Economics
Keywords
- serial correlation
- wavelet
- panel data
Status
Published
ISBN/ISSN/Other
- ISSN: 0377-7332