For testing lack of correlation against spatial autoregressive alternatives, Lagrange multiplier tests enjoy their usual computational advantages, but the chi-squared first-order asymptotic approximation to critical values can be poor in small samples. We develop refined tests for lack of spatial error correlation in regressions, based on Edgeworth expansion. In Monte Carlo simulations these tests, and bootstrap ones, generally significantly outperform chi-squared based tests.
Improved Lagrange multiplier tests in spatial autoregressions
Rossi, Francesca
2014-01-01
Abstract
For testing lack of correlation against spatial autoregressive alternatives, Lagrange multiplier tests enjoy their usual computational advantages, but the chi-squared first-order asymptotic approximation to critical values can be poor in small samples. We develop refined tests for lack of spatial error correlation in regressions, based on Edgeworth expansion. In Monte Carlo simulations these tests, and bootstrap ones, generally significantly outperform chi-squared based tests.
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