Publication Type
Working Paper
Version
publishedVersion
Publication Date
10-2010
Abstract
The robustness of the LM tests for spatial error dependence of Burridge (1980) for the linear regression model and Anselin (1988) for the panel regression model are examined. While both tests are asymptotic ally robust against distributional misspecification, their finite sample behavior can be sensitive to the spatial layout. To overcome this shortcoming, standardized LM tests are suggested. Monte Carlo results show that the new tests possess good finite sample properties. An important observation made throughout this study is that the LM tests for spatial dependence need to be both mean- and variance-adjusted for good finite sample performance to be achieved. The former is, however, often neglected in the literature.
Keywords
Distributional misspecification, Group interaction, LM test, Moran’s ITest, Robustness, Spatial panel models
Discipline
Econometrics
Research Areas
Econometrics
First Page
1
Last Page
25
Publisher
SMU Economics and Statistics Working Paper Series, No. 11-2010
City or Country
Singapore
Embargo Period
1-2-2017
Citation
BALTAGI, Badi H. and YANG, Zhenlin.
Standardized LM Tests for Spatial Error Dependence in Linear or Panel Regressions. (2010). 1-25.
Available at: https://ink.library.smu.edu.sg/soe_research/1896
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 Econometrics Journal, https://doi.org/10.1111/j.1368-423X.2012.00385.x