Abstract

http://ssrn.com/abstract=1136109
 
 

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Testing for Non-Nested Conditional Moment Restrictions Using Unconditional Empirical Likelihood


Taisuke Otsu


Yale University - Cowles Foundation

Myung Hwan Seo


London School of Economics & Political Science (LSE)

Yoon-Jae Whang


Seoul National University - School of Economics

May 16, 2008

Cowles Foundation Discussion Paper No. 1660

Abstract:     
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, C22

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Date posted: May 23, 2008  

Suggested Citation

Otsu, Taisuke and Seo, Myung Hwan and Whang, Yoon-Jae, Testing for Non-Nested Conditional Moment Restrictions Using Unconditional Empirical Likelihood (May 16, 2008). Cowles Foundation Discussion Paper No. 1660. Available at SSRN: http://ssrn.com/abstract=1136109

Contact Information

Taisuke Otsu (Contact Author)
Yale University - Cowles Foundation ( email )
Box 208281
New Haven, CT 06520-8281
United States

Myung Hwan Seo
London School of Economics & Political Science (LSE) ( email )
Houghton Street
London, WC2A 2AE
United Kingdom
Yoon-Jae Whang
Seoul National University - School of Economics ( email )
San 56-1, Silim-dong, Kwanak-ku
Seoul 151-742
Korea
+82 2 80 6362 (Phone)
+82 2 86 4231 (Fax)
HOME PAGE: http://plaza.snu.ac.kr/~whang
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