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Consistent Model Specification Testing

Author

Listed:
  • James Davidson

    (Department of Economics, University of Exeter)

  • Andreea G. Halunga

    (Department of Economics, University of Exeter)

Abstract

This paper proposes a consistent model speci?cation test that can be applied to a wide class of models and estimators, including all variants of quasi-maximum likelihood and generalized method of moments. Our framework is independent of the form of the model and generalizes Bierens?(1982, 1990) approach. It has particular applications in new cases such as heteroskedastic errors, discrete data models, but the chief appeal of our approach is that it provides a "one size ?ts all" test. We specify a test based on a linear combination of individual components of the indicator vector that can be computed routinely, does not need to be tailored to the particular model, and is expected to have power against a wide class of alternatives. Although primarily envisaged as a test of functional form, this type of moment test can also be extended to testing for omitted variables.

Suggested Citation

  • James Davidson & Andreea G. Halunga, 2013. "Consistent Model Specification Testing," Discussion Papers 1312, University of Exeter, Department of Economics.
    • Handle: RePEc:exe:wpaper:1312
    as

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    File URL: https://exetereconomics.github.io/RePEc/dpapers/DP1312.pdf
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    speci?cation testing; quasi-maximum likelihood estimators; generalized method of moments estimators.;
    All these keywords.

    JEL classification:

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

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