TESTING A PARAMETRIC TRANSFORMATION MODEL VERSUS A NONPARAMETRIC ALTERNATIVE

Arkadiusz Szydłowski

Econometric Theory, 2020, vol. 36, issue 5, 871-906

Abstract: Despite an abundance of semiparametric estimators of the transformation model, no procedure has been proposed yet to test the hypothesis that the transformation function belongs to a finite-dimensional parametric family against a nonparametric alternative. In this article, we introduce a bootstrap test based on integrated squared distance between a nonparametric estimator and a parametric null. As a special case, our procedure can be used to test the parametric specification of the integrated baseline hazard in a semiparametric mixed proportional hazard model. We investigate the finite sample performance of our test in a Monte Carlo study. Finally, we apply the proposed test to Kennan’s strike durations data.

Date: 2020
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Persistent link: https://EconPapers.repec.org/RePEc:cup:etheor:v:36:y:2020:i:5:p:871-906_4

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