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Bartlett-type Correction of Distance Metric Test



We derive a corrected distance metric (DM) test of general restrictions. The correction factor depends on the value of the uncorrected statistic and the new statistic is Bartlett-type. In the setting of covariance structure models, we show using simulations that the quality of the new approximation is good and often remarkably good. Especially at around the 95th percentile, the distribution of the corrected test statistic is strikingly close to the relevant asymptotic distribution. This is true for various sample sizes, distributions, and degrees of freedom of the model. As a by-product we provide an intuition for the well-known observation in labor economic applications that using longer panels results in a reversal of the original inference.

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  • Wanling Huang & Artem Prokhorov, 2010. "Bartlett-type Correction of Distance Metric Test," Working Papers 10003, Concordia University, Department of Economics.
  • Handle: RePEc:crd:wpaper:10003

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    More about this item


    Distance Metric; GMM; Asymptotic expansion; Bartlett-type correction;

    JEL classification:

    • C12 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Hypothesis Testing: General

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