Joint LM Test for Homoskedasticity in a One-Way Error Component Model
Syracuse University Center for Policy Research Working Paper No. 72
25 Pages Posted: 20 Apr 2011
Date Written: October 1, 2005
This paper considers a general heteroskedastic error component model using panel data, and derives a joint LM test for homoskedasticity against the alternative of heteroskedasticity in both error components. It contrasts this joint LM test with marginal LM tests that ignore the heteroskedasticity in one of the error components. Monte Carlo results show that misleading inference can occur when using marginal rather than joint tests when heteroskedasticity is present in both components.
Keywords: Panel data, Heteroskedasticity, Lagrange multiplier tests, Error components, Monte Carlo simulations
JEL Classification: C23
Suggested Citation: Suggested Citation