This paper proposes a bias-adjusted version of Breusch and Pagan (1980) Lagrange multiplier (LM) test statistic of error cross-section independence, in the case of panel models with strictly exogenous regressors and normal errors. The exact mean and variance of the test indicator of the LM test...

(the number of cross-sections) and T is fixed (the number of time periods). Three theoretical results emerge: (i) the standard F-test procedure will still deliver asymptotically valid inferences; (ii) under (pure) local random effects, the F-test and random effects test procedures have identical...

We consider the estimation of the unknown mean "&eegr;" of a univariate normal distribution N("&eegr;", 1) given a single observation "x". We wish to obtain an estimator which is admissible and has good risk (and regret) properties. We first argue that the "usual" estimator "t" ("x") = "x" is not...

This paper proposes a standard for notation in econometrics. It presents a fully integrated and internally consistent framework for notation and abbreviations, which is as close as possible to existing common practice. The symbols used are instantly recognizable and interpretable, thus...

We take a fresh look at Theil's BLUS residuals and ask why they have gone out of fashion. All our simulation experiments indicate that tests based on BLUS residuals have higher power than those based on the more popular recursive residuals, even in those cases (structural breaks) where intuition...

In this paper, we confront sensitivity analysis with diagnostic testing. Every model is misspecified (in the sense that no model coincides with the data-generating process), but a model is useful if the parameters of interest (the focus) are not sensitive to small perturbations in the underlying...