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A Heteroskedasticity-Robust F-Test Statistic for Individual Effects

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  • Chris D. Orme
  • Takashi Yamagata
Abstract
We derive the asymptotic distribution of the standard F-test statistic for fixed effects, in static linear panel data models, under both non-normality and heteroskedasticity of the error terms, when the cross-section dimension is large but the time series dimension is fixed. It is shown that a simple linear transformation of the F-test statistic yields asymptotically valid inferences and under local fixed (or correlated) individual effects, this heteroskedasticity-robust F-test enjoys higher asymptotic power than a suitably robustified Random Effects test. Wild bootstrap versions of these tests are considered which, in a Monte Carlo study, provide more reliable inference in finite samples.
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  • Chris D. Orme & Takashi Yamagata, 2011. "A Heteroskedasticity-Robust F-Test Statistic for Individual Effects," Economics Discussion Paper Series 1124, Economics, The University of Manchester.
    • Handle: RePEc:man:sespap:1124
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    File URL: http://hummedia.manchester.ac.uk/schools/soss/economics/discussionpapers/EDP-1124.pdf
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