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NONNESTED TESTING IN MODELS ESTIMATED VIA GENERALIZED METHOD OF MOMENTS

Published online by Cambridge University Press:  13 September 2010

Alastair R. Hall  and
Denis Pelletier
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Abstract

We analyze the limiting distribution of the Rivers and Vuong (2002, Econometrics Journal 5, 1–39) statistic for choosing between two competing dynamic models based on a comparison of generalized method of moments minimands. It is shown that (i) if both models are misspecified then the statistic has a standard normal distribution under the null hypothesis of equal fit but the ranking could be determined by the choice of the weighting matrix; (ii) if both models are correctly specified or locally misspecified then the limiting distribution of the test statistic is nonstandard under the null.

Type
Brief Report
Information
Econometric Theory , Volume 27 , Issue 2 , April 2011 , pp. 443 - 456
Copyright
Copyright © Cambridge University Press 2010

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Footnotes

We thank Atsushi Inoue, Eric Renault, Quang Vuong, Ken West, a coeditor, and two anonymous referees for helpful comments.

References

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