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Testing Under Local Misspecification and Artificial Regressions


  • Walter Sosa Escudero

    () (Department of Economics, Universidad de San Andres)

  • Anil K. Bera

    (University of Illinois)

  • Gabriel Montes Rojas

    (City University London)


An additivity property of LM tests is derived, linking joint, marginal and Bera-Yoon `adjusted' tests, hence the latter can be derived as the difference of the first two. An artificial regression framework provides an intuitive geometrical illustration of the Bera-Yoon principle.

Suggested Citation

  • Walter Sosa Escudero & Anil K. Bera & Gabriel Montes Rojas, 2009. "Testing Under Local Misspecification and Artificial Regressions," Working Papers 97, Universidad de San Andres, Departamento de Economia, revised Oct 2009.
  • Handle: RePEc:sad:wpaper:97

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    References listed on IDEAS

    1. Bera, Anil K. & Sosa-Escudero, Walter & Yoon, Mann, 2001. "Tests for the error component model in the presence of local misspecification," Journal of Econometrics, Elsevier, vol. 101(1), pages 1-23, March.
    2. T. S. Breusch & A. R. Pagan, 1980. "The Lagrange Multiplier Test and its Applications to Model Specification in Econometrics," Review of Economic Studies, Oxford University Press, vol. 47(1), pages 239-253.
    3. Baltagi, Badi H. & Bresson, Georges & Pirotte, Alain, 2006. "Joint LM test for homoskedasticity in a one-way error component model," Journal of Econometrics, Elsevier, vol. 134(2), pages 401-417, October.
    4. Davidson, Russell & MacKinnon, James G, 1987. "Implicit Alternatives and the Local Power of Test Statistics," Econometrica, Econometric Society, vol. 55(6), pages 1305-1329, November.
    5. Anselin, Luc & Bera, Anil K. & Florax, Raymond & Yoon, Mann J., 1996. "Simple diagnostic tests for spatial dependence," Regional Science and Urban Economics, Elsevier, vol. 26(1), pages 77-104, February.
    6. Bera, Anil K. & Yoon, Mann J., 1993. "Specification Testing with Locally Misspecified Alternatives," Econometric Theory, Cambridge University Press, vol. 9(04), pages 649-658, August.
    7. MacKinnon, James G, 1992. "Model Specification Tests and Artificial Regressions," Journal of Economic Literature, American Economic Association, vol. 30(1), pages 102-146, March.
    8. Saikkonen, Pentti, 1989. "Asymptotic relative efficiency of the classical test statistics under misspecification," Journal of Econometrics, Elsevier, vol. 42(3), pages 351-369, November.
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    Cited by:

    1. Ming He & Kuan-Pin Lin, 2015. "Testing in a Random Effects Panel Data Model with Spatially Correlated Error Components and Spatially Lagged Dependent Variables," Econometrics, MDPI, Open Access Journal, vol. 3(4), pages 1-36, November.
    2. Federico Zincenko & Walter Sosa-Escudero & Gabriel Montes-Rojas, 2014. "Robust tests for time-invariant individual heterogeneity versus dynamic state dependence," Empirical Economics, Springer, vol. 47(4), pages 1365-1387, December.
    3. E. Fe-Rodríguez & C. Orme, 2006. "On the sensitivity of Kernel-based Conditional Moment Tests to Unconsidered Local Alternatives," The School of Economics Discussion Paper Series 0606, Economics, The University of Manchester.

    More about this item


    specification tests; LM tests; artificial regression;

    JEL classification:

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


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