Document Type
Discussion Paper
Publication Date
5-1-2008
CFDP Number
1660
CFDP Pages
29
Abstract
We propose non-nested hypotheses tests for conditional moment restriction models based on the method of generalized empirical likelihood (GEL). By utilizing the implied GEL probabilities from a sequence of unconditional moment restrictions that contains equivalent information of the conditional moment restrictions, we construct Kolmogorov-Smirnov and Cramer-von Mises type moment encompassing tests. Advantages of our tests over Otsu and Whang’s (2007) tests are: (i) they are free from smoothing parameters, (ii) they can be applied to weakly dependent data, and (iii) they allow non-smooth moment functions. We derive the null distributions, validity of a bootstrap procedure, and local and global power properties of our tests. The simulation results show that our tests have reasonable size and power performance in finite samples.
Recommended Citation
Otsu, Taisuke; Seo, Myung Hwan; and Whang, Yoon-Jae, "Testing for Non-Nested Conditional Moment Restrictions Using Unconditional Empirical Likelihood" (2008). Cowles Foundation Discussion Papers. 1964.
https://elischolar.library.yale.edu/cowles-discussion-paper-series/1964