Super-Consistent Tests of Lp-Functional Form
AbstractThis paper develops a consistent test of best Lp-predictor functional form for a time series process. By functionally relating two moment conditions with different nuisance parameters we are able to construct a vector moment condition in which at least one element must be non-zero under the alternative. Specifically, we provide a sufficient condition for moment conditions of the type characterized by Stinchcombe and White (1998) to reveal model mis-specification for any nuisance parameter value. When the sufficient condition fails an alternative moment condition is guaranteed to work. A simulation study clearly demonstrates the superiority of a randomized test: randonly selecting the nuisance parameter leads to more power than average- and supremum-test functionals, and obtains empirical power nearly equivelant to uniformly most powerful tests in most cases.
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Bibliographic InfoPaper provided by Florida International University, Department of Economics in its series Working Papers with number 0610.
Length: 19 pages
Date of creation: Sep 2006
Date of revision:
consistent test; conditional moment test; best Lp-predictor; nonlinear model.;
Find related papers by JEL classification:
- C12 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Hypothesis Testing: General
- C45 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Neural Networks and Related Topics
- C52 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Evaluation, Validation, and Selection
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- Bierens, H.J., 1989.
"A consistent conditional moment test of functional form,"
Serie Research Memoranda
0064, VU University Amsterdam, Faculty of Economics, Business Administration and Econometrics.
- Bierens, Herman J, 1990. "A Consistent Conditional Moment Test of Functional Form," Econometrica, Econometric Society, vol. 58(6), pages 1443-58, November.
- King, Maxwell L & Shively, Thomas S, 1993. "Locally Optimal Testing When a Nuisance Parameter Is Present Only under the Alternative," The Review of Economics and Statistics, MIT Press, vol. 75(1), pages 1-7, February.
- Jonathan Hill, 2006. "Asymptotically Nuisance-Parameter-Free Consistent Tests of Lp-Functional Form," Working Papers 0608, Florida International University, Department of Economics.
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