A Joint Score Test for Heteroscedasticity in the Two Way Error Components Model

Abstract

This article extends the work by Holly and Gardiol (2000) (A score test for individual heteroscedasticity in a one-way error component model. In: Krishnakumar, J., Ronchetti, E., Eds. Panel Data Econometrics: Future Directions. Elsevier, North-Holland, Amsterdam, pp. 199–211, Ch. 10) to the two-way error components model. It deals exclusively with a joint heteroscedasticity test by first deriving Rao's efficient score statistics. Then, based on appropriate set of assumptions, we deduce the asymptotic distribution of the score under contiguous alternatives. Finally, we provide the expression for the score test statistic in the presence of heteroscedasticity and discuss its asymptotic local power.

Keywords:

• Joint score test
• Error components model
• Heteroscedasticity.

Mathematics Subject Classification:

• Primary 60E05
• Secondary 60F05.