Testing for individual sphericity in heterogeneous panels

Broda, Simon A

doi:10.1093/biomet/asz018

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Journal article

Testing for individual sphericity in heterogeneous panels

Broda, Simon A Department of Banking and Finance, University of Zurich, Andreasstrasse 15, 8050 Zurich, Switzerland

2019-5-13

Published in:

Biometrika. - Oxford University Press (OUP). - 2019, vol. 106, no. 3, p. 740-747

Agricultural and Biological Sciences (miscellaneous)

Statistics, Probability and Uncertainty

General Agricultural and Biological Sciences

English Summary
This manuscript considers locally best invariant tests for sphericity in heterogeneous panels. A new integral representation for the characteristic function of the test statistic under the null is presented, along with an algorithm for inverting it to obtain the distribution function. A saddlepoint approximation to the null distribution addresses the need to quickly compute approximate $p$-values in empirical work. The approximation shows substantial improvements over the normal approximation when the cross-sectional dimension is small.

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