Pesaran, M. Hashem; Xie, Yimeng - 2021
residuals from panels with latent factors results in over-rejection and propose a randomized test statistic to correct for over … shows that the standard CD test remains valid if the latent factors are weak, and proposes a simple bias-corrected CD test …, labelled CD*, which is shown to be asymptotically normal, irrespective of whether the latent factors are weak or strong. This …