Testing for nonnested conditional moment restrictions via conditional empirical likelihood

Taisuke Otsu, Yoon Jae Whang

Research output: Contribution to journalArticle

6 Citations (Scopus)

Abstract

We propose nonnested tests for competing conditional moment restriction models using the method of conditional empirical likelihood, recently developed by Kitamura, Tripathi, and Ahn (2004) and Zhang and Gijbels (2003). To define the test statistics, we use the implied conditional probabilities from conditional empirical likelihood, which take into account the full implications of conditional moment restrictions. We propose three types of nonnested tests: the moment-encompassing, Cox-type, and efficient score-encompassing tests. We derive the asymptotic null distributions and investigate their power properties against a sequence of local alternatives and a fixed global alternative. Our tests have distinct global power properties from some of the existing tests based on finite-dimensional unconditional moment restrictions. Simulation experiments show that our tests have reasonable finite sample properties and dominate some of the existing nonnested tests in terms of size-corrected powers.

Original languageEnglish
Pages (from-to)114-153
Number of pages40
JournalEconometric Theory
Volume27
Issue number1
DOIs
Publication statusPublished - 2011 Feb 1
Externally publishedYes

Fingerprint

global power
Conditional moment restrictions
Empirical likelihood
Testing
Non-nested tests
statistics
simulation
Encompassing
experiment
Asymptotic distribution
Finite sample properties
Local alternatives
Simulation experiment
Test statistic
Conditional probability

ASJC Scopus subject areas

  • Social Sciences (miscellaneous)
  • Economics and Econometrics

Cite this

Testing for nonnested conditional moment restrictions via conditional empirical likelihood. / Otsu, Taisuke; Whang, Yoon Jae.

In: Econometric Theory, Vol. 27, No. 1, 01.02.2011, p. 114-153.

Research output: Contribution to journalArticle

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