ROBUST PARAMETER ESTIMATION FOR RANDOM EFFECT PANEL DATA MODEL IN THE PRESENCE OF HETEROSCEDASTICITY AND INFLUENTIAL OBSERVATIONS

Authors

  • Sani Muhammad
  • Suleiman Shamsuddeen
  • Ismail G. Baoku

DOI:

https://doi.org/10.33003/fjs-2020-0404-689

Keywords:

Heteroscedasticity; Influential observations; Panel Data; Random Effect Model; RHCCM; Weighted Least Square

Abstract

Panel data estimators can strongly be biased and inconsistent in the presence of heteroscedasticity and anomalous observations called influential observations (IOs) in Random effect (RE) panel data model. The existing methods (LWS, WLSF, WLSDRGP) address only the problem of IO but fail to remedy the combine problem of heteroscedasticity and IOs.  Therefore, in this research we develop a method that will remedy the combine problem of heteroscedasticity and IOs based on robust heteroscedasticity consistent covariance matrix (RHCCM) estimator and fast improvised influential distance (FIID) weighting method denoted by WLSFIID. The simulation and numerical evidences show that our proposed estimation method is more efficient than the existing methods by providing smallest bias, and smallest standard error of HC4 and HC5.

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Published

2021-08-13

How to Cite

Muhammad, S., Shamsuddeen, S., & Baoku, I. G. (2021). ROBUST PARAMETER ESTIMATION FOR RANDOM EFFECT PANEL DATA MODEL IN THE PRESENCE OF HETEROSCEDASTICITY AND INFLUENTIAL OBSERVATIONS. FUDMA JOURNAL OF SCIENCES, 4(4), 561 - 569. https://doi.org/10.33003/fjs-2020-0404-689