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Fredrik NG Andersson. Photo.

Fredrik N G Andersson

Associate professor

Fredrik NG Andersson. Photo.

A simple wavelet-based test for serial correlation in panel data models

Author

  • Yushu Li
  • Fredrik N G Andersson

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