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Tests for the existence of group effects and interactions for two-way models with dependent errors

Author

Listed:
  • Yuichi Goto

    (Faculty of Mathematics, Kyushu University)

  • Kotone Suzuki

    (Waseda University)

  • Xiaofei Xu

    (Wuhan University)

  • Masanobu Taniguchi

    (Waseda University)

Abstract

In this paper, we propose tests for the existence of random effects and interactions for two-way models with dependent errors. We prove that the proposed tests are asymptotically distribution-free which have asymptotically size $${{\tau }}$$ τ and are consistent. We elucidate the nontrivial power under the local alternative when a sample size tends to infinity and the number of groups is fixed. A simulation study is performed to investigate the finite-sample performance of the proposed tests. In the real data analysis, we apply our tests to the daily log-returns of 24 stock prices from six countries and four sectors. We find that there is no strong evidence to support the existence of substantial differences in the log-return across countries, nor to the existence of interactions between countries and sectors. However, there exists random effect differences in the daily log-return series across different sectors.

Suggested Citation

  • Yuichi Goto & Kotone Suzuki & Xiaofei Xu & Masanobu Taniguchi, 2023. "Tests for the existence of group effects and interactions for two-way models with dependent errors," Annals of the Institute of Statistical Mathematics, Springer;The Institute of Statistical Mathematics, vol. 75(3), pages 511-532, June.
    • Handle: RePEc:spr:aistmt:v:75:y:2023:i:3:d:10.1007_s10463-022-00853-3
    DOI: 10.1007/s10463-022-00853-3
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    References listed on IDEAS

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