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Combining Significance of Correlated Statistics with Application to Panel Data

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  • Matei Demetrescu
  • Uwe Hassler
  • Adina‐Ioana Tarcolea

Abstract

The inverse normal method, which is used to combine P‐values from a series of statistical tests, requires independence of single test statistics in order to obtain asymptotic normality of the joint test statistic. The paper discusses the modification by Hartung (1999, Biometrical Journal, Vol. 41, pp. 849–855), which is designed to allow for a certain correlation matrix of the transformed P‐values. First, the modified inverse normal method is shown here to be valid with more general correlation matrices. Secondly, a necessary and sufficient condition for (asymptotic) normality is provided, using the copula approach. Thirdly, applications to panels of cross‐correlated time series, stationary as well as integrated, are considered. The behaviour of the modified inverse normal method is quantified by means of Monte Carlo experiments.

Suggested Citation

  • Matei Demetrescu & Uwe Hassler & Adina‐Ioana Tarcolea, 2006. "Combining Significance of Correlated Statistics with Application to Panel Data," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 68(5), pages 647-663, October.
    • Handle: RePEc:bla:obuest:v:68:y:2006:i:5:p:647-663
    DOI: 10.1111/j.1468-0084.2006.00181.x
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    References listed on IDEAS

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    1. Im, K.S. & Pesaran, M.H., 2003. "On The Panel Unit Root Tests Using Nonlinear Instrumental Variables," Cambridge Working Papers in Economics 0347, Faculty of Economics, University of Cambridge.
    2. Heike, Hans-Dieter & Tarcolea, Constantin, 2000. "Grundlagen der Statistik und Wahrscheinlichkeitsrechnung," Publications of Darmstadt Technical University, Institute for Business Studies (BWL) 2453, Darmstadt Technical University, Department of Business Administration, Economics and Law, Institute for Business Studies (BWL).
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