Bartlett-type Correction of Distance Metric Test
AbstractWe derive a corrected distance metric (DM) test of general restrictions. The correction factor depends on the value of the uncorrected statistic and the new statistic is Bartlett-type. In the setting of covariance structure models, we show using simulations that the quality of the new approximation is good and often remarkably good. Especially at around the 95th percentile, the distribution of the corrected test statistic is strikingly close to the relevant asymptotic distribution. This is true for various sample sizes, distributions, and degrees of freedom of the model. As a by-product we provide an intuition for the well-known observation in labor economic applications that using longer panels results in a reversal of the original inference.
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Bibliographic InfoPaper provided by Concordia University, Department of Economics in its series Working Papers with number 10003.
Date of creation: 29 Jun 2010
Date of revision:
Distance Metric; GMM; Asymptotic expansion; Bartlett-type correction;
Find related papers by JEL classification:
- C12 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Hypothesis Testing: General
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