PANIC (2010) Sample Moment and PAC tests for Idiosyncratic Component

Share:

Description

This function performs the tests of PANIC (2010) and models A, B, and C from Moon and Perron (2004). One PMSB test estimates the pooled autoregressive coefficient, and the other uses a sample moment. The sample moments test is based off of the modified Sargan-Bhargava test (MSB). Each test rejects after the test statistic goes below the critical value of -1.64.

Usage

1
panic10(x, nfac, k1, criteria, demean)

Arguments

x

A NxT matrix containing the data

nfac

An integer specifying the maximum number of factors allowed while estimating the factor model.

k1

The maximum lag allowed in the ADF test.

criteria

a character vector with values of either IC1, IC2, IC3, AIC1, BIC1, AIC3, BIC3, or eigen. Choosing eigen makes the number of factors equal to the number of columns whose sum of eigenvalues is less than or equal to .5.

demean

logical argument. If TRUE, function performs tests on demeaned data. If FALSE, uses non-demeanded data generating process.

Details

This function gives results for Moon and Perron tests with models A, B, and C as well as the pooled tests from PANIC (2010) and the panel. A assumes no deterministic component. B assumes a constant and allows for a fixed effect model. C allows a constant and trend. pa-pb Pooled test from PANIC (2010). Null of nonstationarity. If both reject conclude stationarity. However, if only one rejects the panel is nonstationary.

Value

rho1 Estimation of the Pooled Autoregressive Coefficient.

MP.tests A data frame containing either the test statistics for the Moon and Perron model A and B tests if demeaned = FALSE or a data frame containing the test statistics for the pooled tests as well as Moon and Perron's model C

PMSB.tests a data frame containing the test statistic for the PMSB test, the rho coefficient, and either the LM test from Bai and Ng (2004) or the ADF test from Bai and Ng (2004)

nfac An integer speciyfing the maximum number of factors allowed while estimating the factor model.

k1 an integer that is the maximum lag allowed in the ADF test.

criteria a character vector with values of either IC1, IC2, IC3, AIC1, BIC1, AIC3, BIC3, or eigen. Choosing eigen makes the number of factors equal to the number of columns whose sum of eigenvalues is less than or equal to .5.

func a character vector representing which function was run

ic a numeric vector containing the number of components that were estimated

PMSB Unit root test tends to zero. The unit root hypothesis is rejected in favor of stationarity when the PMSB test goes below a critical value.

References

Bai, Jushan, and Serena Ng. 'Panel Unit Root Tests With Cross-Section Dependence: A Further Investigation.' Econometric Theory 26.04 (2010): 1088-1114. Print.

Bai, Jushan, and Serena Ng. 'A PANIC Attack on Unit Roots and Cointegration.' Econometrica 72.4 (2004): 1127-1177. Print.