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The Effect of Nuisance Parameters on the Power of LM Tests in Logit and Probit Models

N.E. Savin () and Allan Würtz
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N.E. Savin: University of Iowa

Working Papers from University of Iowa, Department of Economics

Abstract: In econometrics, most null hypotheses are composite, dividing the parameters into parameters of interest and nuisance parameters. The domain of the nuisance parameters can influence the size-corrected critical value and hence the power of a test. We show that the domain of the nuisance parameters determines which version of the LM test to use in logit and probit models.

Keywords: ECONOMIC MODELS; ECONOMETRICS (search for similar items in EconPapers)
JEL-codes: C10 C11 (search for similar items in EconPapers)
Pages: 23 pages
Date: 1996
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