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The Interpretation of the Cox Test in Econometrics

Author

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  • Gordon Fisher
  • Michael McAleer

Abstract

This note seeks to clarify whether applications of Cox's (1961) modified likelihood ratio principle logically require a two- or one-tailed test. Logic requires the test of discrimination be one-tailed and the significance test for non-nested hypotheses be two-tailed. The significance test of a pair of non-nested hypotheses involves another extraneous hypothesis to which the cause of deviation from the tested hypothesis away from the alternative may be attributed.

Suggested Citation

  • Gordon Fisher & Michael McAleer, 1980. "The Interpretation of the Cox Test in Econometrics," Working Paper 371, Economics Department, Queen's University.
    • Handle: RePEc:qed:wpaper:371
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    Cited by:

    1. J. M. C. Santos Silva, 2001. "A score test for non-nested hypotheses with applications to discrete data models," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 16(5), pages 577-597.
    2. Silva João M. C. Santos & Tenreyro Silvana & Windmeijer Frank, 2015. "Testing Competing Models for Non-negative Data with Many Zeros," Journal of Econometric Methods, De Gruyter, vol. 4(1), pages 29-46, January.
    3. Mur, Jesús & Angulo, Ana, 2009. "Model selection strategies in a spatial setting: Some additional results," Regional Science and Urban Economics, Elsevier, vol. 39(2), pages 200-213, March.
    4. Mizon, Grayham E & Richard, Jean-Francois, 1986. "The Encompassing Principle and Its Application to Testing Non-nested Hypotheses," Econometrica, Econometric Society, vol. 54(3), pages 657-678, May.
    5. Keunkwan Ryu & Kuo-yuan Liang, 1992. "Relationship of Forecast Encompassing to Composite Forecasts with Simulations and an Application," UCLA Economics Working Papers 668, UCLA Department of Economics.
    6. Luc Anselin, 1988. "Model Validation in Spatial Econometrics: A Review and Evaluation of Alternative Approaches," International Regional Science Review, , vol. 11(3), pages 279-316, December.
    7. Hagemann, Andreas, 2012. "A simple test for regression specification with non-nested alternatives," Journal of Econometrics, Elsevier, vol. 166(2), pages 247-254.

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