IDEAS home Printed from https://ideas.repec.org/p/bru/bruedp/03-11.html
   My bibliography  Save this paper

A Hypergeometric Test for Omitted Nonlinearity

Author

Listed:
  • Steve Lawford

    ()

Abstract

A frequently used test for unspeciÞed nonlinear omissions is the parametric RESET, which is based upon a Þnite polynomial. We follow Abadir (1999), who suggests that the generalized hypergeometric function may provide a more ßexible proxy for the omission; and propose a new approach, semi-nonparametric in spirit, that is based upon estimation of the hypergeometric parameters, and which does not require large datasets. While minimal ex ante assumptions are made about the functional form, this is fully revealed following implementation. Using Monte Carlo simulation, we examine null distributions,and then show that the small-sample power of our test can be a considerable improvement over that of the RESET, when the correct class of functional forms of the omission is known. We investigate a variety of theoretical and numerical issues (including rapid and stable numerical optimization) that arise in development of a workable procedure, and other practical solutions that should be especially useful whenever hypergeometrics are applied to problems of modelling nonlinearity.

Suggested Citation

  • Steve Lawford, 2003. "A Hypergeometric Test for Omitted Nonlinearity," Economics and Finance Discussion Papers 03-11, Economics and Finance Section, School of Social Sciences, Brunel University.
  • Handle: RePEc:bru:bruedp:03-11
    as

    Download full text from publisher

    File URL: http://www.brunel.ac.uk/329/efwps/03-11.pdf
    Download Restriction: no

    Other versions of this item:

    More about this item

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bru:bruedp:03-11. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (John.Hunter). General contact details of provider: .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.