Durbin–Wu–Hausman Specification Tests

Robert H. Patrick

Chapter 28 in Handbook of Financial Econometrics, Mathematics, Statistics, and Machine Learning:(In 4 Volumes), 2020, pp 1075-1108 from World Scientific Publishing Co. Pte. Ltd.

Abstract: This chapter discusses Durbin, Wu, and Hausman (DWH) specification tests and provides examples of their application and interpretation. DWH tests compare alternative parameter estimates and can be useful in discerning endogeneity issues (omitted variables, measurement error/errors in variables, and simultaneity), incorrect functional form and contemporaneous correlation in the lagged dependent variable — serial correlation model, testing alternative estimators for a model, and testing alternative theoretical models. Empirical applications are provided illustrating the use of DWH tests in comparing LS, IV, FE, RE, and GMM estimators.

Keywords: Financial Econometrics; Financial Mathematics; Financial Statistics; Financial Technology; Machine Learning; Covariance Regression; Cluster Effect; Option Bound; Dynamic Capital Budgeting; Big Data (search for similar items in EconPapers)
JEL-codes: C01 C1 G32 (search for similar items in EconPapers)
Date: 2020
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Citations: View citations in EconPapers (1)

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