Testing for non-nested conditional moment restrictions using unconditional empirical likelihood

Taisuke Otsu, Myung Hwan Seo, Yoon Jae Whang

Research output: Contribution to journalArticle

3 Citations (Scopus)

Abstract

We propose non-nested hypothesis tests for conditional moment restriction models based on the method of generalized empirical likelihood (GEL). By utilizing the implied GEL probabilities from a sequence of unconditional moment restrictions that contains equivalent information of the conditional moment restrictions, we construct KolmogorovSmirnov and Cramrvon Mises type moment encompassing tests. Advantages of our tests over Otsu and Whang's (2011) tests are: (i) they are free from smoothing parameters, (ii) they can be applied to weakly dependent data, and (iii) they allow non-smooth moment functions. We derive the null distributions, validity of a bootstrap procedure, and local and global power properties of our tests. The simulation results show that our tests have reasonable size and power performance in finite samples.

Original languageEnglish
Pages (from-to)370-382
Number of pages13
JournalJournal of Econometrics
Volume167
Issue number2
DOIs
Publication statusPublished - 2012 Apr 1
Externally publishedYes

Keywords

  • Conditional moment restrictions
  • Empirical likelihood
  • Non-nested tests

ASJC Scopus subject areas

  • Economics and Econometrics

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