Principles and Methods in the Testing of Alternative Models

Gordon Fisher and Michael McAleer

No 275167, Queen's Institute for Economic Research Discussion Papers from Queen's University - Department of Economics

Abstract: This paper seeks to distinguish the principles upon which testing of statistical hypotheses may be based and the practical methods which these principles generate. Six examples are given for the case of nested hypotheses as illustrations. In particular, Seber's (1964) conclusion that the Wald, Lagrange Multiplier and Likelihood Ratio Principles all lead to exactly the same test statistic in the case of a linear hypothesis, is re-examined in the light of a strict interpretation of these principles. Simple relations between various test statistics and their distributions are outlined. The concept of an artificial model is analyzed. A distinction is made between an artificial model that is in some sense an 'unrestricted' specification and one that is simply an algorithm. For non-nested hypotheses, an artificial model with prior information on the parameters is regarded as conforming to the Wald Principle. When arbitrary numerical methods are used as 'identifying' restrictions, the artificial model reduces to an algorithm since it cannot reasonably be 'accepted'.

Keywords: Financial Economics; Research Methods/ Statistical Methods (search for similar items in EconPapers)
Pages: 40
Date: 1980-08
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
https://ageconsearch.umn.edu/record/275167/files/QUEENS-IER-PAPER-400.pdf (application/pdf)

Related works:
Working Paper: Principles and Methods in the Testing of Alternative Models (1980)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ags:queddp:275167

DOI: 10.22004/ag.econ.275167

Access Statistics for this paper

More papers in Queen's Institute for Economic Research Discussion Papers from Queen's University - Department of Economics Contact information at EDIRC.
Bibliographic data for series maintained by AgEcon Search ().