Model Adequacy Checks for Discrete Choice Dynamic Models
AbstractThis paper proposes new parametric model adequacy tests for possibly nonlinear and nonstationary time series models with noncontinuous data distribution, which is often the case in applied work. In particular, we consider the correct specification of parametric conditional distributions in dynamic discrete choice models, not only of some particular conditional characteristics such as moments or symmetry. Knowing the true distribution is important in many circumstances, in particular to apply efficient maximum likelihood methods, obtain consistent estimates of partial effects and appropriate predictions of the probability of future events. We propose a transformation of data which under the true conditional distribution leads to continuous uniform iid series. The uniformity and serial independence of the new series is then examined simultaneously. The transformation can be considered as an extension of the integral transform tool for noncontinuous data. We derive asymptotic properties of such tests taking into account the parameter estimation effect. Since transformed series are iid we do not require any mixing conditions and asymptotic results illustrate the double simultaneous checking nature of our test. The test statistics converges under the null with a parametric rate to the asymptotic distribution, which is case dependent, hence we justify a parametric bootstrap approximation. The test has power against local alternatives and is consistent. The performance of the new tests is compared with classical specification checks for discrete choice models.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Center for Economic and Financial Research (CEFIR) in its series Working Papers with number w0170.
Length: 19 pages
Date of creation: Feb 2012
Date of revision:
Contact details of provider:
Postal: 117418 Russia, Moscow, Nakhimovsky pr., 47, office 720
Phone: +7 (495) 105 50 02
Fax: +7 (495) 105 50 03
Web page: http://www.cefir.ru
More information through EDIRC
Goodness of fit; diagnostic test; parametric conditional distribution; discrete choice models; parameter estimation effect; bootstrap;
Find related papers by JEL classification:
- C12 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Hypothesis Testing: General
- C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models &bull Diffusion Processes
- C52 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Evaluation, Validation, and Selection
This paper has been announced in the following NEP Reports:
- NEP-ALL-2012-03-28 (All new papers)
- NEP-DCM-2012-03-28 (Discrete Choice Models)
- NEP-ECM-2012-03-28 (Econometrics)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Donald W. K. Andrews, 1997.
"A Conditional Kolmogorov Test,"
Econometrica, Econometric Society,
Econometric Society, vol. 65(5), pages 1097-1128, September.
- Donald W.K. Andrews, 1996. "A Conditional Kolmogorov Test," Cowles Foundation Discussion Papers, Cowles Foundation for Research in Economics, Yale University 1111R, Cowles Foundation for Research in Economics, Yale University.
- James D. Hamilton & Oscar Jorda, 2002.
"A Model of the Federal Funds Rate Target,"
Journal of Political Economy, University of Chicago Press,
University of Chicago Press, vol. 110(5), pages 1135-1167, October.
- James D. Hamilton & Oscar Jorda, 2000. "A Model for the Federal Funds Rate Target," NBER Working Papers 7847, National Bureau of Economic Research, Inc.
- Oscar Jorda & James D. Hamilton, 2003. "A model for the federal funds rate target," Working Papers, University of California, Davis, Department of Economics 997, University of California, Davis, Department of Economics.
- James D. Hamilton & Oscar Jorda, . "A model for the federal funds rate target," Department of Economics, California Davis - Department of Economics 99-07, California Davis - Department of Economics.
- Richard Startz, .
"Binomial Autoregressive Moving Average Models with an Application to U.S. Recessions,"
Working Papers, University of Washington, Department of Economics
UWEC-2006-10-FC, University of Washington, Department of Economics.
- Startz, Richard, 2008. "Binomial Autoregressive Moving Average Models With an Application to U.S. Recessions," Journal of Business & Economic Statistics, American Statistical Association, American Statistical Association, vol. 26, pages 1-8, January.
- Neil Shephard & Tina Hviid Rydberg, 2002.
"Dynamics of trade-by-trade price movements: decomposition and models,"
Economics Series Working Papers, University of Oxford, Department of Economics
2002-FE-04, University of Oxford, Department of Economics.
- Tina Hviid Rydberg & Neil Shephard, 2003. "Dynamics of Trade-by-Trade Price Movements: Decomposition and Models," Journal of Financial Econometrics, Society for Financial Econometrics, vol. 1(1), pages 2-25.
- Tina Hviid Rydberg & Neil Shephard, 2002. "Dynamics of trade-by-trade price movements: decomposition and models," Economics Papers 2002-W1, Economics Group, Nuffield College, University of Oxford.
- Tina Hviid Rydberg & Neil Shephard, 2002. "Dynamics of trade-by-trade price movements: decomposition and models," OFRC Working Papers Series, Oxford Financial Research Centre 2002fe04, Oxford Financial Research Centre.
- Robert M. de Jong & Tiemen Woutersen, 2007.
"Dynamic time series binary choice,"
Economics Working Paper Archive, The Johns Hopkins University,Department of Economics
538, The Johns Hopkins University,Department of Economics.
- Tiemen Woutersen & Robert M. de Jong, 2004. "Dynamic time series binary choice," Econometric Society 2004 North American Summer Meetings, Econometric Society 365, Econometric Society.
- Mora, Juan & Moro-Egido, Ana I., 2008. "On specification testing of ordered discrete choice models," Journal of Econometrics, Elsevier, Elsevier, vol. 143(1), pages 191-205, March.
- Denuit, Michel & Lambert, Philippe, 2005. "Constraints on concordance measures in bivariate discrete data," Journal of Multivariate Analysis, Elsevier, Elsevier, vol. 93(1), pages 40-57, March.
- Bai, Jushan & Ng, Serena, 2001. "A consistent test for conditional symmetry in time series models," Journal of Econometrics, Elsevier, Elsevier, vol. 103(1-2), pages 225-258, July.
- Corradi, Valentina & Swanson, Norman R., 2006.
"Bootstrap conditional distribution tests in the presence of dynamic misspecification,"
Journal of Econometrics, Elsevier,
Elsevier, vol. 133(2), pages 779-806, August.
- Valentina Corradi & Norman R. Swanson, 2003. "Bootstrap Conditional Distribution Tests In the Presence of Dynamic Misspecification," Departmental Working Papers, Rutgers University, Department of Economics 200311, Rutgers University, Department of Economics.
- Wooldridge, Jeffrey M., 1990.
"An encompassing approach to conditional mean tests with applications to testing nonnested hypotheses,"
Journal of Econometrics, Elsevier,
Elsevier, vol. 45(3), pages 331-350.
- Wooldridge, J.M, 1989. "An Encompassing Approach To Conditional Mean Tests With Applications To Testing Nonnested Hypotheses," Working papers, Massachusetts Institute of Technology (MIT), Department of Economics 511, Massachusetts Institute of Technology (MIT), Department of Economics.
- Basu Deepankar & de Jong Robert M, 2007. "Dynamic Multinomial Ordered Choice with an Application to the Estimation of Monetary Policy Rules," Studies in Nonlinear Dynamics & Econometrics, De Gruyter, De Gruyter, vol. 11(4), pages 1-35, December.
- Michael Dueker, 1997. "Strengthening the case for the yield curve as a predictor of U.S. recessions," Review, Federal Reserve Bank of St. Louis, Federal Reserve Bank of St. Louis, issue Mar, pages 41-51.
- Delgado, Miguel A. & Stute, Winfried, 2008. "Distribution-free specification tests of conditional models," Journal of Econometrics, Elsevier, Elsevier, vol. 143(1), pages 37-55, March.
- Jushan Bai, 2003. "Testing Parametric Conditional Distributions of Dynamic Models," The Review of Economics and Statistics, MIT Press, vol. 85(3), pages 531-549, August.
- Igor Kheifets & Carlos Velasco, 2013. "New Goodness-of-fit Diagnostics for Conditional Discrete Response Models," Cowles Foundation Discussion Papers, Cowles Foundation for Research in Economics, Yale University 1924, Cowles Foundation for Research in Economics, Yale University.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Julia Babich).
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.