Generalized empirical likelihood specification test robust to local misspecification

Haiqi Li, Rui Fan and Sung Y. Park

Economics Letters, 2018, vol. 171, issue C, 149-153

Abstract: It is well known that many of the standard specification tests may not be robust when the alternative is misspecified. This study analyzes a robust specification test for generalized empirical likelihood (GEL) estimators in a weakly dependent time series setting. We show that the usual score test statistic asymptotically follows a non-central chi-square distribution under the local misspecification in the GEL framework. Thus, it spuriously rejects the null hypothesis too frequently. We propose a robust score specification test that asymptotically follows a central chi-square distribution under the local misspecification. A Monte Carlo simulation verifies the usefulness of the proposed tests.

Keywords: Generalized empirical likelihood; Local misspecification; Robust specification test (search for similar items in EconPapers)
JEL-codes: C12 C52 (search for similar items in EconPapers)
Date: 2018
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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecolet:v:171:y:2018:i:c:p:149-153

DOI: 10.1016/j.econlet.2018.07.024

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