Super-Consistent Tests of Lp-Functional Form
This paper develops a consistent test of best Lp-predictor functional form for a time series process. By functionally relating two moment conditions with different nuisance parameters we are able to construct a vector moment condition in which at least one element must be non-zero under the alternative. Specifically, we provide a sufficient condition for moment conditions of the type characterized by Stinchcombe and White (1998) to reveal model mis-specification for any nuisance parameter value. When the sufficient condition fails an alternative moment condition is guaranteed to work. A simulation study clearly demonstrates the superiority of a randomized test: randonly selecting the nuisance parameter leads to more power than average- and supremum-test functionals, and obtains empirical power nearly equivelant to uniformly most powerful tests in most cases.
|Date of creation:||Sep 2006|
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- Jonathan Hill, 2006. "Asymptotically Nuisance-Parameter-Free Consistent Tests of Lp-Functional Form," Working Papers 0608, Florida International University, Department of Economics.
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- King, Maxwell L & Shively, Thomas S, 1993. "Locally Optimal Testing When a Nuisance Parameter Is Present Only under the Alternative," The Review of Economics and Statistics, MIT Press, vol. 75(1), pages 1-7, February.
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