Tests for general error specifications and non-nested models : a simultaneous approach

36 Pages·1991·1.9 MB·English

by  Bera, Anil K

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Faculty Working Paper 91-0136
330
B385
1991:136 COPY 2
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Tests for General Error Specifications
A
and Non-Nested Models: Simultaneous Approach
AnilK. Bera MichaelMcAleer
UniversityofIllinois University ofWesternAustralia
M. Hashem Pesaran Mann Yoon
J.
University ofCalifornia, LosAngeles University ofIllinois
Department ofEconomics
Bureau ofEconomic and Business Research
College ofCommerce and Business Administration
University ofIllinois at Urbana-Champaign

BEBR
FACULTY WORKING PAPER NO. 91-0136
College of Commerce and Business Administration
University of Illinois at Urbana-Champaign
May 1991
Tests for General Error Specifications
and Non-Nested Models: A Simultaneous Approach
Anil K. Bera
University of Illinois
Michael McAleer
University of Western Australia
M. Hashem Pesaran
University of California, Los Angeles
Mann Yoon
J.
University of Illinois
Department of Economics

ABSTRACT
This paper is concerned with joint test of non-nested models and simultaneous departures from
homoskedasticity, serial independence and normality of the disturbance terms. Locally equivalent
alternative models are used to constructjoint tests since they provide a convenient way to incorporate
more than one type of departures from the classical conditions, the joint tests represent a simple
asymptotic solution tothe "pre-testing" problem in the context ofnon-nested linear regression models.
Our simulation results indicate that the proposed tests have good finite sample properties.
KeyWordsandPhrases: locally equivalentalternative models; non-normal errors; non-spherical errors;
pre-testing problem; simulation study