Testing for Non-nested Conditional Moment Retrictions via Conditional Empirical Likelihood

Taisuke Otsu and Yoon-Jae Whang
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Taisuke Otsu: Cowles Foundation, Yale University, https://cowles.yale.edu/

No 1533, Cowles Foundation Discussion Papers from Cowles Foundation for Research in Economics, Yale University

Abstract: We propose non-nested tests for competing conditional moment resctriction models using a method of empirical likelihood. Our tests are based on the method of conditional empirical likelihood developed by Kitamura, Tripathi and Ahn (2004) and Zhang and Gijbels (2003). By using the conditional implied probabilities, we develop three non-nested tests: the moment encompassing, Cox-type, and effcient score encompassing tests. Compared to the existing non-nested tests which mainly focus on testing unconditional moment restrictions, our approach directly tests conditional moment restrictions which imply the infinite number of unconditional moment restrictions. We derive the null distributions and power properties of the proposed tests. Simulation experiments show that our tests have reasonable finite sample properties.

Keywords: Empirical likelihood; Non-nested tests; Encompassing tests; Cox-type tests; Conditional moment restrictions (search for similar items in EconPapers)
JEL-codes: C12 C13 C14 C22 (search for similar items in EconPapers)
Pages: 34 pages
Date: 2005-09
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Published in Econometric Theory (February 2011), 27(1): 114-153

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Related works:
Journal Article: TESTING FOR NONNESTED CONDITIONAL MOMENT RESTRICTIONS VIA CONDITIONAL EMPIRICAL LIKELIHOOD (2011)
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