NONNESTED TESTING IN MODELS ESTIMATED VIA GENERALIZED METHOD OF MOMENTS

Alastair Hall and Denis Pelletier

Econometric Theory, 2011, vol. 27, issue 2, 443-456

Abstract: We analyze the limiting distribution of the Rivers and Vuong (2002, Econometrics Journal 5, 1–39) statistic for choosing between two competing dynamic models based on a comparison of generalized method of moments minimands. It is shown that (i) if both models are misspecified then the statistic has a standard normal distribution under the null hypothesis of equal fit but the ranking could be determined by the choice of the weighting matrix; (ii) if both models are correctly specified or locally misspecified then the limiting distribution of the test statistic is nonstandard under the null.

Date: 2011
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Working Paper: Non-Nested Testing in Models Estimated via Generalized Method of Moments (2007)
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Persistent link: https://EconPapers.repec.org/RePEc:cup:etheor:v:27:y:2011:i:02:p:443-456_00

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