Tests for the error component model in the presence of local misspecification

It is well known that most of the standard specification tests are not valid when the alternative hypothesis is misspecified. This is particularly true in the error component model, when one tests for either random effects or serial correlation without taking account of the presence of the other eff...

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Autores principales: Bera, Anil K., Sosa Escudero, Walter, Yoon, Mann
Formato: Articulo Documento de trabajo
Lenguaje:Inglés
Publicado: 2000
Materias:
Acceso en línea:http://sedici.unlp.edu.ar/handle/10915/3506
http://www.depeco.econo.unlp.edu.ar/doctrab/doc22.pdf
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id I19-R120-10915-3506
record_format dspace
institution Universidad Nacional de La Plata
institution_str I-19
repository_str R-120
collection SEDICI (UNLP)
language Inglés
topic Ciencias Económicas
economía
investigación
spellingShingle Ciencias Económicas
economía
investigación
Bera, Anil K.
Sosa Escudero, Walter
Yoon, Mann
Tests for the error component model in the presence of local misspecification
topic_facet Ciencias Económicas
economía
investigación
description It is well known that most of the standard specification tests are not valid when the alternative hypothesis is misspecified. This is particularly true in the error component model, when one tests for either random effects or serial correlation without taking account of the presence of the other effect. In this paper we study the size and power of the standard Rao´s score tests analytically and by simulation when the data is contaminated by local misspecification. These tests are adversely affected under misspecification. We suggest simple procedures to test for random effects (or serial correlation) in the presence of local serial correlation (or random effects), and these tests require ordinary least squares residuals only. Our Monte Carlo results demonstrate that the suggested tests have good finite sample properties for local misspecification, and in some cases even for far distant misspecification. Our tests are also capable of detecting the right direction of the departure from the null hypothesis. We also provide some empirical illustrations to highlight the usefulness of our tests.
format Articulo
Documento de trabajo
author Bera, Anil K.
Sosa Escudero, Walter
Yoon, Mann
author_facet Bera, Anil K.
Sosa Escudero, Walter
Yoon, Mann
author_sort Bera, Anil K.
title Tests for the error component model in the presence of local misspecification
title_short Tests for the error component model in the presence of local misspecification
title_full Tests for the error component model in the presence of local misspecification
title_fullStr Tests for the error component model in the presence of local misspecification
title_full_unstemmed Tests for the error component model in the presence of local misspecification
title_sort tests for the error component model in the presence of local misspecification
publishDate 2000
url http://sedici.unlp.edu.ar/handle/10915/3506
http://www.depeco.econo.unlp.edu.ar/doctrab/doc22.pdf
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