Publication Type
Working Paper
Version
publishedVersion
Publication Date
1-2009
Abstract
This paper presents a modified LM test of spatial error components, which is shown to be robust against distributional misspecifications and spatial layouts. The proposed test differs from the LM test of Anselin (2001) by a term in the denominators of the test statistics. This term disappears when either the errors are normal, or the variance of the diagonal elements of the product of spatial weights matrix and its transpose is zero or approaches to zero as sample size goes large. When neither is true, as is often the case in practice, the effect of this term can be significant even when sample size is large. As a result, there can be severe size distortions of the Anselin's LM test, a phenomenon revealed by the Monte Carlo results of Anselin and Moreno (2003) and further confirmed by the Monte Carlo results presented in this paper. Our Monte Carlo results also show that the proposed test performs well in general.
Keywords
Distributional misspecifications, Robustness, Spatial layouts, Spatial error components, LM tests
Discipline
Econometrics
Research Areas
Econometrics
Volume
04-2009
First Page
1
Last Page
19
Publisher
SMU Economics and Statistics Working Paper Series, No. 04-2009
City or Country
Singapore
Citation
YANG, Zhenlin.
A Robust LM Test for Spatial Error Components. (2009). 04-2009, 1-19.
Available at: https://ink.library.smu.edu.sg/soe_research/1137
Copyright Owner and License
Authors
Creative Commons License
This work is licensed under a Creative Commons Attribution-NonCommercial-No Derivative Works 4.0 International License.
Comments
Published in Regional Science and Urban Economics, 2010. https://doi.org/10.1016/j.regsciurbeco.2009.10.001