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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, 2014. "A Heteroskedasticity-Robust F -Test Statistic for Individual Effects," Econometric Reviews, Taylor & Francis Journals, vol. 33(5-6), pages 431-471, August.
    • Handle: RePEc:taf:emetrv:v:33:y:2014:i:5-6:p:431-471
    DOI: 10.1080/07474938.2013.824792
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