Maximal invariant likelihood based testing of semi-linear models
In this paper, we use a maximal invariant likelihood (MIL) to construct two likelihood ratio (LR) tests. The first involves testing for the inclusion of a non-linear regressor and the second involves testing of a linear regressor against the alternative of a non-linear regressor. We report the results of a Monte Carlo experiment that compares the size and power properties of the traditional LR tests with those of our proposed MIL based LR tests. Our simulation results show that in both cases the MIL based tests have more accurate asymptotic critical values and better behaved (i.e., better centred) power curves than their classical counterparts
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Volume (Year): 48 (2007)
Issue (Month): 3 (September)
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References listed on IDEAS
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- Laskar, M.R. & King, M.L., 1998. "Modified Likelihood and Related Methods for Handling Nuisance Parameters in the Linear Regression Model," Monash Econometrics and Business Statistics Working Papers 5/98, Monash University, Department of Econometrics and Business Statistics.
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- Godfrey,L. G., 1991. "Misspecification Tests in Econometrics," Cambridge Books, Cambridge University Press, number 9780521424592.
- McManus, Douglas A. & Nankervis, John C. & Savin, N. E., 1994. "Multiple optima and asymptotic approximations in the partial adjustment model," Journal of Econometrics, Elsevier, vol. 62(2), pages 91-128, June.
- Martin, Vance L., 1998. "Econometric Society Australasian Meetings 1997 (ESAM97)," Econometric Theory, Cambridge University Press, vol. 14(06), pages 800-801, December.
- Moulton, Brent R & Randolph, William C, 1989. "Alternative Tests of the Error Components Model," Econometrica, Econometric Society, vol. 57(3), pages 685-93, May.
- Ara, I. & King, M.L., 1995. "Marginal Likelihood Based Tests of a Subvector of the Parameter Vector of Linear Regression Disturbances," Monash Econometrics and Business Statistics Working Papers 12/95, Monash University, Department of Econometrics and Business Statistics.
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