Semi-nonparametric estimation and misspecification testing of diffusion models

Dennis Kristensen

Journal of Econometrics, 2011, vol. 164, issue 2, 382-403

Abstract: Novel transition-based misspecification tests of semiparametric and fully parametric univariate diffusion models based on the estimators developed in [Kristensen, D., 2010. Pseudo-maximum likelihood estimation in two classes of semiparametric diffusion models. Journal of Econometrics 156, 239-259] are proposed. It is demonstrated that transition-based tests in general lack power in detecting certain departures from the null since they integrate out local features of the drift and volatility. As a solution to this, tests that directly compare drift and volatility estimators under the relevant null and alternative are also developed which exhibit better power against local alternatives.

Keywords: Diffusion; process; Kernel; estimation; Nonparametric; Specification; testing; Semiparametric; Transition; density (search for similar items in EconPapers)
Date: 2011
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Citations: View citations in EconPapers (12)

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Related works:
Working Paper: Semi-Nonparametric Estimation and Misspecification Testing of Diffusion Models (2010)
Working Paper: Semi-Nonparametric Estimation and Misspecification Testing of Diffusion Models (2010)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:econom:v:164:y:2011:i:2:p:382-403

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