CPR Working Paper Series No. 72
Joint LM Test For Homoskedasticity In A One-Way Error Component Model
Badi
H. Baltagi, Georges Bresson, and Alain Pirotte
October 2005
Abstract:
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.
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