GMM based tests for locally misspecified models

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This paper shows that the standard Newey-West GMM based test is sensitive to the presence of locally misspecified alternatives. In particular, such test is shown to have incorrect size when the null model is locally contaminated, making the test spuriously reject the null hypothesis even when it is...

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Autores principales: Bera, Anil K., Sosa Escudero, Walter
Formato: Objeto de conferencia
Lenguaje:Inglés
Publicado: 2002
Materias:
Ciencias Económicas
generalized method of moments
testing
misspecification
Acceso en línea:http://sedici.unlp.edu.ar/handle/10915/173850
Aporte de:
SEDICI (UNLP) de Universidad Nacional de La Plata
id I19-R120-10915-173850
record_format dspace
spelling I19-R120-10915-1738502024-11-29T20:37:04Z http://sedici.unlp.edu.ar/handle/10915/173850 GMM based tests for locally misspecified models Bera, Anil K. Sosa Escudero, Walter 2002-11 2002 2024-11-29T15:12:44Z en Ciencias Económicas generalized method of moments testing misspecification This paper shows that the standard Newey-West GMM based test is sensitive to the presence of locally misspecified alternatives. In particular, such test is shown to have incorrect size when the null model is locally contaminated, making the test spuriously reject the null hypothesis even when it is correct. After obtaining the distribution of the Newey-West test statistic under the misspecified alternative, the paper derives a Bera-Yoon modified test based on a restricted GMM estimator, which has the correct size under local misspecification. The paper can be seen as extending the likelihood based results of Saikkonen (1989), Davidson and MacKinnon (1987) and Bera and Yoon (1993) to the GMM framework, which does not require full specification of the underlying probabilistic model. Facultad de Ciencias Económicas Objeto de conferencia Objeto de conferencia http://creativecommons.org/licenses/by-nc-sa/4.0/ Creative Commons Attribution-NonCommercial-ShareAlike 4.0 International (CC BY-NC-SA 4.0) application/pdf
institution Universidad Nacional de La Plata
institution_str I-19
repository_str R-120
collection SEDICI (UNLP)
language Inglés
topic Ciencias Económicas
generalized method of moments
testing
misspecification
spellingShingle Ciencias Económicas
generalized method of moments
testing
misspecification
Bera, Anil K.
Sosa Escudero, Walter
GMM based tests for locally misspecified models
topic_facet Ciencias Económicas
generalized method of moments
testing
misspecification
description This paper shows that the standard Newey-West GMM based test is sensitive to the presence of locally misspecified alternatives. In particular, such test is shown to have incorrect size when the null model is locally contaminated, making the test spuriously reject the null hypothesis even when it is correct. After obtaining the distribution of the Newey-West test statistic under the misspecified alternative, the paper derives a Bera-Yoon modified test based on a restricted GMM estimator, which has the correct size under local misspecification. The paper can be seen as extending the likelihood based results of Saikkonen (1989), Davidson and MacKinnon (1987) and Bera and Yoon (1993) to the GMM framework, which does not require full specification of the underlying probabilistic model.
format Objeto de conferencia
Objeto de conferencia
author Bera, Anil K.
Sosa Escudero, Walter
author_facet Bera, Anil K.
Sosa Escudero, Walter
author_sort Bera, Anil K.
title GMM based tests for locally misspecified models
title_short GMM based tests for locally misspecified models
title_full GMM based tests for locally misspecified models
title_fullStr GMM based tests for locally misspecified models
title_full_unstemmed GMM based tests for locally misspecified models
title_sort gmm based tests for locally misspecified models
publishDate 2002
url http://sedici.unlp.edu.ar/handle/10915/173850
work_keys_str_mv AT beraanilk gmmbasedtestsforlocallymisspecifiedmodels
AT sosaescuderowalter gmmbasedtestsforlocallymisspecifiedmodels
_version_ 1824075661359185920

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