Filtering as a Test of Specification

Matthew J Cushing and Mary G McGarvey

International Economic Review, 1992, vol. 33, issue 1, 129-35

Abstract: This paper generalizes the first differencing test proposed by C. I. Plosser, G. W. Schwert, and H. White to the case of finite one-sided polynomial filters. The authors demonstrate that the filtering test is asymptotically equivalent to a Hausman-Wu test. This provides a computationally simple way of performing the test and analyzing the test's power. The authors show that the choice of lag weights is nontrivial for filters of order greater than one. By examining the optimal choice of filter, the paper shows under what circumstances filtering tests will be powerful. Copyright 1992 by Economics Department of the University of Pennsylvania and the Osaka University Institute of Social and Economic Research Association.

Date: 1992
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