Testing for Non-Nested Conditional Moment Restrictions Using Unconditional Empirical Likelihood
Yale University - Cowles Foundation
Myung Hwan Seo
London School of Economics & Political Science (LSE)
Seoul National University - School of Economics
May 16, 2008
Cowles Foundation Discussion Paper No. 1660
We propose non-nested hypotheses 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 Kolmogorov-Smirnov and Cramer-von Mises type moment encompassing tests. Advantages of our tests over Otsu and Whang's (2007) 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.
Number of Pages in PDF File: 30
Keywords: Empirical likelihood, Non-nested tests, Conditional moment restrictions
JEL Classification: C12, C13, C14, C22working papers series
Date posted: May 23, 2008
© 2014 Social Science Electronic Publishing, Inc. All Rights Reserved.
This page was processed by apollo3 in 0.547 seconds