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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 Papers 371, Queen's University, Department of Economics.
  • Handle: RePEc:qed:wpaper:371
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    Cited by:

    1. 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.
    2. 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.

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