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

Taisuke Otsu, Myung Hwan Seo and Yoon-Jae Whang
Additional contact information
Taisuke Otsu: Cowles Foundation, Yale University, https://cowles.yale.edu/
Myung Hwan Seo: London School of Economics

No 1660, Cowles Foundation Discussion Papers from Cowles Foundation for Research in Economics, Yale University

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.

Keywords: Empirical likelihood; Non-nested tests; Conditional moment restrictions (search for similar items in EconPapers)
JEL-codes: C12 C13 C14 C22 (search for similar items in EconPapers)
Pages: 29 pages
Date: 2008-05
New Economics Papers: this item is included in nep-ecm
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Citations: View citations in EconPapers (2)

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Journal Article: Testing for non-nested conditional moment restrictions using unconditional empirical likelihood (2012)
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