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Testing for no factor structures: on the use of Hausman-type statistics

Castagnetti, Carolina; Rossi, Eduardo; Trapani, Lorenzo

Authors

Carolina Castagnetti

Eduardo Rossi



Abstract

Castagnetti et al. (2015) propose two max-type statistics to test for the presence of a factor structure in a large stationary panel data model. In this contribution, we study the use of Hausman-type statistics based on the CCE estimator of Pesaran (2006) and the IE estimator developed by Bai (2009; see also Song, 2013). We show that tests based on either estimators cannot be employed directly, and either need further assumptions than those required for the simple purpose of estimation, or bias corrections, or cannot be used altogether.

Journal Article Type Article
Publication Date May 1, 2015
Journal Economics Letters
Print ISSN 0165-1765
Electronic ISSN 0165-1765
Publisher Elsevier
Peer Reviewed Peer Reviewed
Volume 130
APA6 Citation Castagnetti, C., Rossi, E., & Trapani, L. (2015). Testing for no factor structures: on the use of Hausman-type statistics. Economics Letters, 130, doi:10.1016/j.econlet.2015.02.030
DOI https://doi.org/10.1016/j.econlet.2015.02.030
Keywords Large panels; Testing for factor structure; Hausman-type test
Publisher URL http://www.sciencedirect.com/science/article/pii/S0165176515000907
Copyright Statement Copyright information regarding this work can be found at the following address: http://eprints.nottingh.../end_user_agreement.pdf
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