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A Test for Functional Form Against Nonparametric Alternatives

Published online by Cambridge University Press:  18 October 2010

Jeffrey M. Wooldridge
Jeffrey M. Wooldridge
Affiliation:
Michigan State University
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Abstract

A test for neglected nonlinearities in regression models is proposed. The test is of the Davidson-MacKinnon type against an increasingly rich set of non-nested alternatives, and is based on sieve estimation of the alternative model. For the case of a linear parametric model, the test statistic is shown to be asymptotically standard normal under the null, while rejecting with probability going to one if the linear model is misspecified. A small simulation study suggests that the test has adequate finite sample properties, but one must guard against over fitting the nonparametric alternative.

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Type
Articles
Information
Econometric Theory , Volume 8 , Issue 4 , December 1992 , pp. 452 - 475
Copyright
Copyright © Cambridge University Press 1992

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