Testing for non-nested conditional moment restrictions using unconditional empirical likelihood

Taisuke Otsu, Myung Hwan Seo and Yoon-Jae Whang

Journal of Econometrics, 2012, vol. 167, issue 2, 370-382

Abstract: We propose non-nested hypothesis tests for conditional moment restriction models based on the method of generalized empirical likelihood (GEL). By utilizing the implied GEL probabilities from a sequence of unconditional moment restrictions that contains equivalent information of the conditional moment restrictions, we construct Kolmogorov–Smirnov and Cramér–von Mises type moment encompassing tests. Advantages of our tests over Otsu and Whang’s (2011) tests are: (i) they are free from smoothing parameters, (ii) they can be applied to weakly dependent data, and (iii) they allow non-smooth moment functions. We derive the null distributions, validity of a bootstrap procedure, and local and global power properties of our tests. The simulation results show that our tests have reasonable size and power performance in finite samples.

Keywords: Empirical likelihood; Non-nested tests; Conditional moment restrictions (search for similar items in EconPapers)
JEL-codes: C12 C13 C14 C22 (search for similar items in EconPapers)
Date: 2012
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Citations: View citations in EconPapers (2)

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Working Paper: Testing for Non-Nested Conditional Moment Restrictions Using Unconditional Empirical Likelihood (2008)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:econom:v:167:y:2012:i:2:p:370-382

DOI: 10.1016/j.jeconom.2011.09.022

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