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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. 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. 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.

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