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Testing for non-nested conditional moment restrictions using unconditional empirical likelihood

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  • Otsu, Taisuke
  • Seo, Myung Hwan
  • Whang, Yoon-Jae

Abstract

We propose non-nested hypothesis tests for conditional moment restriction models based on the method of generalized empirical likelihood (GEL). By utilizing the implied GEL probabilities from a sequence of unconditional moment restrictions that contains equivalent information of the conditional moment restrictions, we construct Kolmogorov–Smirnov and Cramér–von Mises type moment encompassing tests. Advantages of our tests over Otsu and Whang’s (2011) tests are: (i) they are free from smoothing parameters, (ii) they can be applied to weakly dependent data, and (iii) they allow non-smooth moment functions. We derive the null distributions, validity of a bootstrap procedure, and local and global power properties of our tests. The simulation results show that our tests have reasonable size and power performance in finite samples.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Econometrics.

Volume (Year): 167 (2012)
Issue (Month): 2 ()
Pages: 370-382

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Handle: RePEc:eee:econom:v:167:y:2012:i:2:p:370-382

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Web page: http://www.elsevier.com/locate/jeconom

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Keywords: Empirical likelihood; Non-nested tests; Conditional moment restrictions;

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Cited by:
  1. Komunjer, Ivana & Ragusa, Giuseppe, 2009. "Existence and Uniqueness of Semiparametric Projections," University of California at San Diego, Economics Working Paper Series qt0wg3j51c, Department of Economics, UC San Diego.

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