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Serial dependence robust bootstrap test for cross-sectional correlation

Ulrich Hounyo et al.

Econometrics Journal2025https://doi.org/10.1093/ectj/utaf009article
AJG 3ABDC A*
Weight
0.46

Abstract

Summary We propose a novel bootstrap-based test for cross-sectional dependence (CD) in panel models, maintaining robustness against serial dependence. While serial dependence is common in panel data, existing tests often assume serial independence. Our cluster wild bootstrap CD test procedure mirrors Pesaran’s original CD test and is very simple to implement. This procedure preserves serial dependence while testing for cross-sectional independence. Theoretical validity is established for our bootstrap-based test, with simulations highlighting its performance in finite samples. Using R&D investment panel data, we illustrate the utility of our bootstrap methods.

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https://doi.org/https://doi.org/10.1093/ectj/utaf009

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@article{ulrich2025,
  title        = {{Serial dependence robust bootstrap test for cross-sectional correlation}},
  author       = {Ulrich Hounyo et al.},
  journal      = {Econometrics Journal},
  year         = {2025},
  doi          = {https://doi.org/https://doi.org/10.1093/ectj/utaf009},
}

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Serial dependence robust bootstrap test for cross-sectional correlation

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Evidence weight

0.46

Balanced mode · F 0.40 / M 0.15 / V 0.05 / R 0.40

F · citation impact0.37 × 0.4 = 0.15
M · momentum0.60 × 0.15 = 0.09
V · venue signal0.50 × 0.05 = 0.03
R · text relevance †0.50 × 0.4 = 0.20

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