Linearity and Misspecification Tests for Vector Smooth Transition Regression Models

Timo Teräsvirta and Yukai Yang

CREATES Research Papers from Department of Economics and Business Economics, Aarhus University

Abstract: The purpose of the paper is to derive Lagrange multiplier and Lagrange multiplier type specification and misspecification tests for vector smooth transition regression models. We report results from simulation studies in which the size and power properties of the proposed asymptotic tests in small samples are considered. The results on simulating the size show that these tests generally suffer from positive size distortion. We find that both Wilks's ? and Rao's F statistic, the latter in particular, have satisfactory size properties and can generally be recommended for empirical use. The local asymptotic power and finite sample power properties of these tests are studied as well. JEL Classification: C12, C32, C52

Keywords: Vector STAR models; Linearity test; Misspecification test; Vector nonlinear time series; Serial correlation; Parameter constancy; Residual nonlinearity test (search for similar items in EconPapers)
Pages: 36
Date: 2014-02-07
New Economics Papers: this item is included in nep-ecm, nep-ets and nep-ore
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Citations: View citations in EconPapers (48)

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Working Paper: Linearity and misspecification tests for vector smooth transition regression models (2014)
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