M Tests with a New Normalization Matrix

Zhongjun Qu and Yi-Ting Chen ()
Additional contact information
Yi-Ting Chen: Institute of Economics, Academia Sinica

No WP2010-050, Boston University - Department of Economics - Working Papers Series from Boston University - Department of Economics

Abstract: This paper proposes a new family of M tests, building on the work of Kuan and Lee (2006) and Kiefer, Vogelsang and Bunzel (2000). The new test replaces the asymptotic covariance matrix in the conventional M test with an alternative normalization matrix, constructed using moment functions estimated from (K + 1) recursive subsamples. It is simple to implement, automatically accounts for the e¤ect of parameter estimation uncertainty, and allows for condi- tional heteroskedasticity and serial correlation of general forms. It converges to the central F distribution under the fixed-K asymptotics, and to the Chi-square distribution if K is allowed to approach in?nity. We illustrate its applicability using three simulation examples. They are: (1) specification testing for conditional heteroskedastic models, (2) nonnested testing with serially correlated errors, and (3) testing for serial correlation with unknown heteroskedasticity. The test exhibits good size properties and its power can be substantially higher than the test of Kuan and Lee (2006). Overall, the results suggest that, by integrating "self-normalization" and "fixed-bandwidth asymptotics" into the M-testing framework, we obtain an analytically simple yet widely applicable approach to misspeci?cation testing.

Pages: 36 pages
Date: 2010-01
References: View references in EconPapers View complete reference list from CitEc
Citations:

There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it.

Related works:
Journal Article: M Tests with a New Normalization Matrix (2015)
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:bos:wpaper:wp2010-050

Access Statistics for this paper

More papers in Boston University - Department of Economics - Working Papers Series from Boston University - Department of Economics Contact information at EDIRC.
Bibliographic data for series maintained by Program Coordinator ().