Maximum-Likelihood Based Inference in the Two-Way Random Effects Model with Serially Correlated Time Effects
Posted: 30 Mar 2013
Date Written: March 28, 2004
The general case where the time specific effect in a two way model follows an arbitrary ARMA process has not been considered previously. We offer a straightforward maximum likelihood estimator for this case. Allowing for general ARMA processes raises the issue of model specification and we propose tests of the null hypothesis of no serial correlation as well as tests for discriminating between different specifications. A Monte-Carlo experiment evaluates the finite-sample properties of the estimators and test-statistics.
Keywords: Random effects model, maximum likelihood, ARMA
Suggested Citation: Suggested Citation