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  • - xtistest - now on SSC: Portmanteau IS test for serial correlation in a fixed effect panel setting

    Dear all

    -xtistest- is now available on SSC, thanks to Kit Baum. It performs the Inoue & Solon (2006) Portmanteau test for serial correlation. It takes the standard residuals (option e in predict) as input and returns the IS statistic as well as the corresponding p-values.

    By default is tests for any order of serial correlation, but I recommend restricting it to say, 2nd order correlations by adding the lags(2) option. That said, even with that restricting, the test requires N to be large relative to T. If you are not in a large N, small T framework, I recommend using -xtqptest-. The big advantage of this test is that it allows for gaps in the data, which is not the case for -xtqptest-.

    You can specify as many variables to be tested as you want (it loops internally).

    Suited for balanced and unbalanced panels and gapped data.

    Example usage
    Code:
    sysuse xtline1, clear
    xtreg calories, fe
    predict e, e
    xtistest e, lags(2)
    Output is at the bottom of this post. As you can see, this setting (T >> N) is not suitable for xtistest. The program will produce a warning as long as N < 0.8T, but don't rely on it.

    Cheers
    Jesse

    References
    Testing for Serial Correlation in Fixed-Effects Panel Data Models, Benjamin Born and Jörg Breitung, Econometric Reviews 2016
    http://www.tandfonline.com/doi/abs/1...38.2014.976524

    Click image for larger version

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  • #2
    xtistest has been updated, much thanks go to Kit Baum.

    1. Bug fix: Messy unbalanced panels would lead the command to allocate the wrong observations to the wrong panel units. This has now been fixed (as far as I can tell, bug reports always welcome).
    2. Specifying xtistest without any lag specification now defaults to 2 lags instead of all of them.
    3. If you still want to use all lags, specify lags(all).

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