Approximating the Approximate Slopes of LR, W, and LM Test Statistics

Lonnie Magee ()

Econometric Theory, 1987, vol. 3, issue 02, pages 247-271

Abstract: A Taylor series approach is used to derive approximations to the approximate slope of LR, W, and LM test statistics. These can be useful when the approximate slopes themselves are complicated. The results are applied to the test of linear coefficient restrictions in the linear model with a nonscalar covariance matrix. They can be used to find cases where the Wald test may badly over-reject in this model. The results shed some new light on the over-rejection that has been noted in the special cases of AR(1) disturbances and the SURE model.

Date: 1987

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