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GENERAL SPECIFICATION TESTING WITH LOCALLYMISSPECIFIED MODELS

Published online by Cambridge University Press:  22 March 2010

Anil K. Bera ,
Gabriel Montes-Rojas  and
Walter Sosa-Escudero
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Abstract

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A well known result is that many of the tests used ineconometrics, such as the Rao score (RS) test, maynot be robust to misspecified alternatives, that is,when the alternative model does not correspond tothe underlying data generating process. Under thisscenario, these tests spuriously reject the nullhypothesis too often. We generalize this result togeneralized method of moments–based (GMM-based)tests. We also extend the method proposed in Beraand Yoon (1993, Econometric Theory9, 649–658) for constructing RS tests that arerobust to local misspecification to GMM-based tests.Finally, a further generalization for generalestimating and testing functions is developed. Thisframework encompasses both likelihood and GMM-basedresults.

Information

Type
Brief Report
Information
Econometric Theory , Volume 26 , Issue 6 , December 2010 , pp. 1838 - 1845
Copyright
Copyright © Cambridge University Press 2010

Footnotes

We are grateful to the coeditor Jinyong Hahn andtwo anonymous referees for many pertinent commentsand suggestions. However, we retain theresponsibility for any remaining shortcomings.

References

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