IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this paper or follow this series

Model Adequacy Checks for Discrete Choice Dynamic Models

  • Igor Kheifets

    (New Economic School, Moscow)

  • Carlos Velasco

    (Department of Economics, Universidad Carlos III de Madrid)

This paper proposes new parametric model adequacy tests for possibly nonlinear and nonstationary time series models with noncontinuous data distribution, which is often the case in applied work. In particular, we consider the correct specification of parametric conditional distributions in dynamic discrete choice models, not only of some particular conditional characteristics such as moments or symmetry. Knowing the true distribution is important in many circumstances, in particular to apply efficient maximum likelihood methods, obtain consistent estimates of partial effects and appropriate predictions of the probability of future events. We propose a transformation of data which under the true conditional distribution leads to continuous uniform iid series. The uniformity and serial independence of the new series is then examined simultaneously. The transformation can be considered as an extension of the integral transform tool for noncontinuous data. We derive asymptotic properties of such tests taking into account the parameter estimation effect. Since transformed series are iid we do not require any mixing conditions and asymptotic results illustrate the double simultaneous checking nature of our test. The test statistics converges under the null with a parametric rate to the asymptotic distribution, which is case dependent, hence we justify a parametric bootstrap approximation. The test has power against local alternatives and is consistent. The performance of the new tests is compared with classical specification checks for discrete choice models.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://www.cefir.ru/papers/WP170.pdf
Download Restriction: no

Paper provided by Center for Economic and Financial Research (CEFIR) in its series Working Papers with number w0170.

as
in new window

Length: 19 pages
Date of creation: Feb 2012
Date of revision:
Handle: RePEc:cfr:cefirw:w0170
Contact details of provider: Postal: 117418 Russia, Moscow, Nakhimovsky pr., 47, office 720
Phone: +7 (495) 105 50 02
Fax: +7 (495) 105 50 03
Web page: http://www.cefir.ruEmail:


More information through EDIRC

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

as in new window
  1. Delgado, Miguel A. & Stute, Winfried, 2008. "Distribution-free specification tests of conditional models," Journal of Econometrics, Elsevier, vol. 143(1), pages 37-55, March.
  2. Tina Hviid Rydberg & Neil Shephard, 2003. "Dynamics of Trade-by-Trade Price Movements: Decomposition and Models," Journal of Financial Econometrics, Society for Financial Econometrics, vol. 1(1), pages 2-25.
  3. Bai, Jushan & Ng, Serena, 2001. "A consistent test for conditional symmetry in time series models," Journal of Econometrics, Elsevier, vol. 103(1-2), pages 225-258, July.
  4. James D. Hamilton & Oscar Jorda, 2000. "A Model for the Federal Funds Rate Target," NBER Working Papers 7847, National Bureau of Economic Research, Inc.
  5. Wooldridge, J.M, 1989. "An Encompassing Approach To Conditional Mean Tests With Applications To Testing Nonnested Hypotheses," Working papers 511, Massachusetts Institute of Technology (MIT), Department of Economics.
  6. Donald W.K. Andrews, 1996. "A Conditional Kolmogorov Test," Cowles Foundation Discussion Papers 1111R, Cowles Foundation for Research in Economics, Yale University.
  7. Denuit, Michel & Lambert, Philippe, 2005. "Constraints on concordance measures in bivariate discrete data," Journal of Multivariate Analysis, Elsevier, vol. 93(1), pages 40-57, March.
  8. Valentina Corradi & Norman R. Swanson, 2003. "Bootstrap Conditional Distribution Tests In the Presence of Dynamic Misspecification," Departmental Working Papers 200311, Rutgers University, Department of Economics.
  9. Startz, Richard, 2008. "Binomial Autoregressive Moving Average Models With an Application to U.S. Recessions," Journal of Business & Economic Statistics, American Statistical Association, vol. 26, pages 1-8, January.
  10. Basu Deepankar & de Jong Robert M, 2007. "Dynamic Multinomial Ordered Choice with an Application to the Estimation of Monetary Policy Rules," Studies in Nonlinear Dynamics & Econometrics, De Gruyter, vol. 11(4), pages 1-35, December.
  11. Mora, Juan & Moro-Egido, Ana I., 2008. "On specification testing of ordered discrete choice models," Journal of Econometrics, Elsevier, vol. 143(1), pages 191-205, March.
  12. Jushan Bai, 2003. "Testing Parametric Conditional Distributions of Dynamic Models," The Review of Economics and Statistics, MIT Press, vol. 85(3), pages 531-549, August.
  13. Michael Dueker, 1997. "Strengthening the case for the yield curve as a predictor of U.S. recessions," Review, Federal Reserve Bank of St. Louis, issue Mar, pages 41-51.
  14. de Jong, Robert M. & Woutersen, Tiemen, 2011. "Dynamic Time Series Binary Choice," Econometric Theory, Cambridge University Press, vol. 27(04), pages 673-702, August.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:cfr:cefirw:w0170. 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: (Julia Babich)

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.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with 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 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.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.