The Power of Hessian and Outer Product Based Wald and LM Tests
AbstractWald and Lagrange Multiplier (LM) tests can be based on three commonly used estimators of the information matrix : the expectation of the Hessian matric, the Hessian matrix without the expectation operator or the outer product (OP) matrix of the score vectors. Although the Wald and LM tests are asymptotically equivalent, they typically have different powers in finite samples. We prove that Hessian based tests are superior to OP based tests in the normal linear regression model.
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Bibliographic InfoPaper provided by University of Iowa, Department of Economics in its series Working Papers with number 97-02.
Length: 20 pages
Date of creation: 1997
Date of revision:
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Postal: University of Iowa, Department of Economics, Henry B. Tippie College of Business, Iowa City, Iowa 52242
Phone: (319) 335-0829
Fax: (319) 335-1956
Web page: http://tippie.uiowa.edu/economics/
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STATISTICS ; MATHEMATICS ; ECONOMETRICS;
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