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A Simple Heteroskedasticity and Nonnormality Robust F-Test Statistic for Individual Eects

03/2007;

ABSTRACT This paper employs …rst order asymptotic theory in order to es- tablish the asymptotic distribution of the F-test statistic for individ- ual eects, under non-normality and possible heteroskedasticity of the errors, when N ! 1 (the number of cross-sections) and T is …xed (the number of time periods). Whilst asymptotically valid under ho- moskedasticity, the usual F-test and random eects test procedures will be asymptotically over-sized under heteroskedasticity. Both, however, be easily re-scaled to provide an asymptotically valid test procedures which exhibit the same relative power properties as those described in Orme and Yamagata (2006).

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