A low-dimension portmanteau test for non-linearity
AbstractA new test for non-linearity in the conditional mean is proposed using functions of the principal components of regressors. The test extends the non-linearity tests based on Kolmogorov-Gabor polynomials ([Thursby and Schmidt, 1977], [Tsay, 1986] and [Teräsvirta etÂ al., 1993]), but circumvents problems of high dimensionality, is equivariant to collinearity, and includes exponential functions, so is a portmanteau test with power against a wide range of possible alternatives. A Monte Carlo analysis compares the performance of the test to the optimal infeasible test and to alternative tests. The relative performance of the test is encouraging: the test has the appropriate size and has high power in many situations.
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Bibliographic InfoArticle provided by Elsevier in its journal Journal of Econometrics.
Volume (Year): 158 (2010)
Issue (Month): 2 (October)
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Web page: http://www.elsevier.com/locate/jeconom
Functional form Portmanteau test Non-linearity Principal components Collinearity;
Other versions of this item:
- Jennifer Castle & David Hendry, 2010. "A Low-Dimension Portmanteau Test for Non-linearity," Economics Series Working Papers 471, University of Oxford, Department of Economics.
- C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
- C52 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Evaluation, Validation, and Selection
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