Testing a Parametric Function Against a Nonparametric Alternative in IV and GMM Settings

CREATES Research Paper 2009-54

36 Pages Posted: 20 Nov 2009

See all articles by Tue Gørgens

Tue Gørgens

Australian National University (ANU) - Research School of Economics (RSE)

Allan Wurtz

Aarhus University - Department of Economics and Business Economics

Date Written: November 19, 2009

Abstract

This paper develops a specification test for functional form for models identified by moment restrictions, including IV and GMM settings. The general framework is one where the moment restrictions are specified as functions of data, a finite-dimensional parameter vector, and a nonparametric real function (an infinite-dimensional parameter vector). The null hypothesis is that the real function is parametric. The test is relatively easy to implement and its asymptotic distribution is known. The test performs well in simulation experiments.

Keywords: generalized method of moments, specification test, nonparametric alternative, LM statistic, generalized arc-sine distribution

JEL Classification: C12, C14, C52

Suggested Citation

Gorgens, Tue and Wurtz, Allan, Testing a Parametric Function Against a Nonparametric Alternative in IV and GMM Settings (November 19, 2009). CREATES Research Paper 2009-54, Available at SSRN: https://ssrn.com/abstract=1509369 or http://dx.doi.org/10.2139/ssrn.1509369

Tue Gorgens (Contact Author)

Australian National University (ANU) - Research School of Economics (RSE) ( email )

Canberra, Australian Capital Territory 0200
Australia

Allan Wurtz

Aarhus University - Department of Economics and Business Economics ( email )

Universitetsparken
Building 350
DK-8000 Aarhus C
Denmark
+45 8942 1133 (Phone)
+45 8613 6334 (Fax)

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