Information matrix tests for multinomial logit models

Dante Amengual (), Gariele Fiorentini () and Enrique Sentan ()
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Dante Amengual: CEMFI, Centro de Estudios Monetarios y Financieros, https://www.cemfi.es/
Gariele Fiorentini: Università di Firenze and RCEA
Enrique Sentan: CEMFI, Centro de Estudios Monetarios y Financieros, https://www.cemfi.es/

Working Papers from CEMFI

Abstract: We show that the influence functions of the information matrix test for the multinomial logit model are the Kronecker product of the outer product of the generalised residuals minus their covariance matrix conditional on the explanatory variables times the outer product of those variables. Thus, it resembles a multivariate heteroskedasticity test à la White (1980), which confirms Chesher’s (1984) unobserved heterogeneity interpretation. Our simulation experiments indicate that using theoretical expressions for the conditional covariance matrices involved substantially reduces size distortions, while the parametric bootstrap practically eliminates them. We also show that the test has good power against several relevant alternatives.

Keywords: Hessian matrix; outer product of the score; specification test; unobserved heterogeneity. (search for similar items in EconPapers)
JEL-codes: C25 C35 (search for similar items in EconPapers)
Date: 2024-06
New Economics Papers: this item is included in nep-dcm and nep-ecm
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