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The Encompassing Principle and Hypothesis Testing

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  • Lu, Maozu
  • Mizon, Grayham E.

Abstract

The exponentially tilted family of densities is used to discuss the relationship between the encompassing principle and the M -test or conditional moment testing principle. It is shown that the two principles are capable of generating the same test statistics and in this sense equivalent. However, there are differences in motivation and emphasis underlying the principles that are important in econometric modeling. In addition, parsimonious encompassing interpretations for test statistics, including those of Cox (1961, in Proceedings of the Fourth Berkeley Symposium on Mathematical Statistics and Probability I , pp. 105-123; 1962, Journal of the Royal Statistical Society, Series B 24, 406-424) and Atkinson (1970, Journal of the Royal Statistical Society, Series B 32, 323-344) are provided.

Suggested Citation

  • Lu, Maozu & Mizon, Grayham E., 1996. "The Encompassing Principle and Hypothesis Testing," Econometric Theory, Cambridge University Press, vol. 12(05), pages 845-858, December.
  • Handle: RePEc:cup:etheor:v:12:y:1996:i:05:p:845-858_00
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    Cited by:

    1. Neil R. Ericsson, 2008. "The Fragility of Sensitivity Analysis: An Encompassing Perspective," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 70(s1), pages 895-914, December.
    2. Christophe Bontemps & Grayham E. Mizon, 2008. "Encompassing: Concepts and Implementation," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 70(s1), pages 721-750, December.
    3. David F. Hendry & Massimiliano Marcellino & Chiara Monfardini, 2008. "Foreword," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 70(s1), pages 711-714, December.
    4. Julia Campos & Neil R. Ericsson & David F. Hendry, 2005. "General-to-specific modeling: an overview and selected bibliography," International Finance Discussion Papers 838, Board of Governors of the Federal Reserve System (U.S.).

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