Wiencierz, Andrea and Greven, Sonja and Küchenhoff, Helmut
Restricted Likelihood Ratio Testing in Linear Mixed Models with General Error Covariance Structure.
Department of Statistics: Technical Reports, No.109
We consider the problem of testing for zero variance components in linear mixed models with correlated or heteroscedastic errors. In the case of independent and identically distributed errors, a valid test exists, which is based on the exact finite sample distribution of the restricted likelihood ratio test statistic under the null hypothesis. We propose to make use of a transformation to derive the (approximate) test distribution for the restricted likelihood ratio test statistic in the case of a general error covariance structure. The proposed test proves its value in simulations and is finally applied to an interesting question in the field of well-being economics.