Testing a parametric transformation model versus a nonparametric alternative

Arkadiusz Szydlowski ()

No 17/15, Discussion Papers in Economics from Division of Economics, School of Business, University of Leicester

Abstract: Despite an abundance of semiparametric estimators of the transformation model, no procedure has been proposed yet to test the hypothesis that the transformation function belongs to a finite-dimensional parametric family against a nonparametric alternative. In this paper we introduce a bootstrap test based on integrated squared distance between a nonparametric estimator and a parametric null. As a special case, our procedure can be used to test the parametric specification of the integrated baseline hazard in a semiparametric mixed proportional hazard (MPH) model. We investigate the finite sample performance of our test in a Monte Carlo study. Finally, we apply the proposed test to Kennan’s strike durations data.

Keywords: Specification testing; Transformation model; Duration model; Bootstrap; Rank estimation (search for similar items in EconPapers)
JEL-codes: C12 C14 C41 (search for similar items in EconPapers)
Date: 2017-07
New Economics Papers: this item is included in nep-ecm and nep-ore
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