Consistent model specification testing
Davidson, James; Halunga, Andreea G.
Date: 1 March 2012
Publisher
University of Exeter Business School
Abstract
This paper proposes a consistent model specfication test that can be applied to a wide
class of models and estimators, including all variants of quasi-maximum likelihood and generalized method of moments. Our framework is independent of the form of the model and generalizes Bierens (1982, 1990) approach. It has particular applications ...
This paper proposes a consistent model specfication test that can be applied to a wide
class of models and estimators, including all variants of quasi-maximum likelihood and generalized method of moments. Our framework is independent of the form of the model and generalizes Bierens (1982, 1990) approach. It has particular applications in new cases such
as heteroskedastic errors, discrete data models, but the chief appeal of our approach is that
it provides a "one size fits all" test. We specify a test based on a linear combination of individual components of the indicator vector that can be computed routinely, does not need
to be tailored to the particular model, and is expected to have power against a wide class of
alternatives. Although primarily envisaged as a test of functional form, this type of moment
test can also be extended to testing for omitted variables.
Economics
Faculty of Environment, Science and Economy
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