IDEAS home Printed from https://ideas.repec.org/a/bla/manchs/v82y2014i4p488-507.html
   My bibliography  Save this article

A Generalized Goodness-of-functional Form Test for Binary and Fractional Regression Models

Author

Listed:
  • Esmeralda A. Ramalho
  • Joaquim J. S. Ramalho
  • José M. R. Murteira

Abstract

type="main"> This paper proposes a new conditional mean test to assess the validity of binary and fractional parametric regression models. The new test checks the joint significance of two simple functions of the fitted index and is based on a very flexible parametric generalization of the postulated model. A Monte Carlo study reveals a promising behaviour for the new test, which compares favourably with that of the well-known RESET test as well as with tests where the alternative model is non-parametric.

Suggested Citation

  • Esmeralda A. Ramalho & Joaquim J. S. Ramalho & José M. R. Murteira, 2014. "A Generalized Goodness-of-functional Form Test for Binary and Fractional Regression Models," Manchester School, University of Manchester, vol. 82(4), pages 488-507, July.
    • Handle: RePEc:bla:manchs:v:82:y:2014:i:4:p:488-507
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10.1111/manc.12032
    Download Restriction: Access to full text is restricted to subscribers.
    ---><---

    As the access to this document is restricted, you may want to look for a different version below or search for a different version of it.

    Other versions of this item:

    References listed on IDEAS

    as
    1. Esmeralda A. Ramalho & Joaquim J. S. Ramalho, 2012. "Alternative Versions of the RESET Test for Binary Response Index Models: A Comparative Study," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 74(1), pages 107-130, February.
    2. J. M. C. Santos Silva, 2001. "A score test for non-nested hypotheses with applications to discrete data models," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 16(5), pages 577-597.
    3. Joaquim J.S. Ramalho & Jacinto Vidigal da Silva, 2009. "A two-part fractional regression model for the financial leverage decisions of micro, small, medium and large firms," Quantitative Finance, Taylor & Francis Journals, vol. 9(5), pages 621-636.
    4. Papke, Leslie E & Wooldridge, Jeffrey M, 1996. "Econometric Methods for Fractional Response Variables with an Application to 401(K) Plan Participation Rates," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 11(6), pages 619-632, Nov.-Dec..
    5. Bera, Anil K & Jarque, Carlos M & Lee, Lung-Fei, 1984. "Testing the Normality Assumption in Limited Dependent Variable Models," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 25(3), pages 563-578, October.
    6. Poirier, Dale J., 1980. "A lagrange multiplier test for skewness in binary logit models," Economics Letters, Elsevier, vol. 5(2), pages 141-143.
    7. Koenker, Roger & Yoon, Jungmo, 2009. "Parametric links for binary choice models: A Fisherian-Bayesian colloquy," Journal of Econometrics, Elsevier, vol. 152(2), pages 120-130, October.
    8. Davidson, Russell & MacKinnon, James G., 1984. "Convenient specification tests for logit and probit models," Journal of Econometrics, Elsevier, vol. 25(3), pages 241-262, July.
    9. Esmeralda A. Ramalho & Joaquim J.S. Ramalho & José M.R. Murteira, 2011. "Alternative Estimating And Testing Empirical Strategies For Fractional Regression Models," Journal of Economic Surveys, Wiley Blackwell, vol. 25(1), pages 19-68, February.
    10. John Xu Zheng, 1996. "A consistent test of functional form via nonparametric estimation techniques," Journal of Econometrics, Elsevier, vol. 75(2), pages 263-289, December.
    11. Daryl Pregibon, 1980. "Goodness of Link Tests for Generalized Linear Models," Journal of the Royal Statistical Society Series C, Royal Statistical Society, vol. 29(1), pages 15-24, March.
    12. Smith, Richard J, 1989. "On the Use of Distributional Mis-specification Checks in Limited Dependent Variable Models," Economic Journal, Royal Economic Society, vol. 99(395), pages 178-192, Supplemen.
    13. Whang, Yoon-Jae, 2000. "Consistent bootstrap tests of parametric regression functions," Journal of Econometrics, Elsevier, vol. 98(1), pages 27-46, September.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Muhammad Suhail Rizwan & Muhammad Moinuddin & Barbara L’Huillier & Dawood Ashraf, 2018. "Does a one-size-fits-all approach to financial regulations alleviate default risk? The case of dual banking systems," Journal of Regulatory Economics, Springer, vol. 53(1), pages 37-74, February.
    2. Alperovych, Yan & Hübner, Georges & Lobet, Fabrice, 2015. "How does governmental versus private venture capital backing affect a firm's efficiency? Evidence from Belgium," Journal of Business Venturing, Elsevier, vol. 30(4), pages 508-525.
    3. DJOKOTO, Justice Gameli & OWUSU, Victor & AWUNYO-VITOR, Dadson, 2020. "Is Organic Agriculture More Scale Efficient Than Conventional Agriculture? The Case Of Cocoa Cultivation In Ghana," Review of Agricultural and Applied Economics (RAAE), Faculty of Economics and Management, Slovak Agricultural University in Nitra, vol. 23(2), October.
    4. Victor Moutinho & Mara Madaleno, 2021. "A Two-Stage DEA Model to Evaluate the Technical Eco-Efficiency Indicator in the EU Countries," IJERPH, MDPI, vol. 18(6), pages 1-21, March.
    5. Maria Simona Andreano & Roberto Benedetti & Federica Piersimoni & Giovanni Savio, 2021. "Mapping Poverty of Latin American and Caribbean Countries from Heaven Through Night-Light Satellite Images," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 156(2), pages 533-562, August.
    6. Silva, Vânia G. & Ramalho, Esmeralda A. & Vieira, Carlos R., 2016. "The impact of SEPA in credit transfer payments: Evidence from the euro area," Research in International Business and Finance, Elsevier, vol. 38(C), pages 404-416.
    7. Akua Agyeiwaa-Afrane & Kofi A. A-O. Agyei-Henaku & Charlotte Badu-Prah & Francis Srofenyoh & Ferguson K. Gidiglo & James K. A. Amezi & Justice G. Djokoto, 2023. "Drivers of Ghanaians’ approval of the electronic levy," SN Business & Economics, Springer, vol. 3(1), pages 1-20, January.
    8. Justice G. Djokoto & Ferguson K. Gidiglo & Francis Y. Srofenyoh & Kofi Aaron A-O. Agyei-Henaku & Akua A. Afrane Arthur & Charlotte Badu-Prah & John Fry, 2020. "Sectoral and spatio-temporal differentiation in technical efficiency: A meta-regression," Cogent Economics & Finance, Taylor & Francis Journals, vol. 8(1), pages 1773659-177, January.
    9. Harald Oberhofer & Michael Pfaffermayr, 2014. "Two-Part Models for Fractional Responses Defined as Ratios of Integers," Econometrics, MDPI, vol. 2(3), pages 1-22, September.
    10. Mohieddine Rahmouni, 2021. "Determinants of capacity utilisation by firms in developing countries: evidence from Tunisia," International Journal of Technological Learning, Innovation and Development, Inderscience Enterprises Ltd, vol. 13(3), pages 212-245.
    11. Djokoto, Justice Gameli & Afari-Sefa, Victor, 2017. "Alternative functional forms for technology choice: Application to cocoa production technologies," Technology in Society, Elsevier, vol. 50(C), pages 110-120.
    12. Ivan Diaz-Rainey & John Ashton & Maz Yap & Murat Genc & Rosalind Whiting, 2015. "The determinants of regulatory responses to risks from financial innovation: Survey evidence from G20," Working Papers 15001, Bangor Business School, Prifysgol Bangor University (Cymru / Wales).
    13. Hodjo, Manzamasso & Dalton, Timothy & Nakelse, Tebila, 2021. "Cereal Land Allocation Under Weather and Price Uncertainties in West Africa," 2021 Conference, August 17-31, 2021, Virtual 315177, International Association of Agricultural Economists.
    14. Bright O. Asante & Renato A. Villano & Omphile Temoso, 2024. "Drivers of integrated crop–livestock farming system’s efficiency for smallholder farmers in the forest-savanna transition agro-ecological zone of Ghana," Environment, Development and Sustainability: A Multidisciplinary Approach to the Theory and Practice of Sustainable Development, Springer, vol. 26(11), pages 29429-29451, November.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Esmeralda A. Ramalho & Joaquim J.S. Ramalho & José M.R. Murteira, 2011. "Alternative Estimating And Testing Empirical Strategies For Fractional Regression Models," Journal of Economic Surveys, Wiley Blackwell, vol. 25(1), pages 19-68, February.
    2. Wilde, Joachim, 2008. "A simple representation of the Bera-Jarque-Lee test for probit models," Economics Letters, Elsevier, vol. 101(2), pages 119-121, November.
    3. Esmeralda A. Ramalho & Joaquim J. S. Ramalho, 2017. "Moment-based estimation of nonlinear regression models with boundary outcomes and endogeneity, with applications to nonnegative and fractional responses," Econometric Reviews, Taylor & Francis Journals, vol. 36(4), pages 397-420, April.
    4. Latouche, Karine & Rouviere, Elodie, 2011. "Brokers vs. Retailers: Evidence from the French Imports Industry of Fresh Produce," 2011 International Congress, August 30-September 2, 2011, Zurich, Switzerland 114398, European Association of Agricultural Economists.
    5. Jaya Prakash Pradhan & Mohammad Zohair, 2015. "Subnational Export Performance and Determinants," Review of Market Integration, India Development Foundation, vol. 7(2), pages 133-174, August.
    6. Harald Oberhofer & Michael Pfaffermayr, 2014. "Two-Part Models for Fractional Responses Defined as Ratios of Integers," Econometrics, MDPI, vol. 2(3), pages 1-22, September.
    7. Santos Silva, J.M.C. & Tenreyro, Silvana & Wei, Kehai, 2014. "Estimating the extensive margin of trade," Journal of International Economics, Elsevier, vol. 93(1), pages 67-75.
    8. Harald Oberhofer & Michael Pfaffermayr, 2012. "Fractional Response Models - A Replication Exercise of Papke and Wooldridge (1996)," Contemporary Economics, University of Economics and Human Sciences in Warsaw., vol. 6(3), September.
    9. Vijverberg, Chu-Ping C. & Vijverberg, Wim P., 2012. "Pregibit: A Family of Discrete Choice Models," IZA Discussion Papers 6359, Institute of Labor Economics (IZA).
    10. Kieschnick, Robert & Moussawi, Rabih, 2018. "Firm age, corporate governance, and capital structure choices," Journal of Corporate Finance, Elsevier, vol. 48(C), pages 597-614.
    11. Pradhan, Jaya Prakash & Zohair, Mohammad, 2014. "Subnational Export Performance and Determinants: Evidence from Two Indian States," MPRA Paper 60029, University Library of Munich, Germany.
    12. Hodjo, Manzamasso & Dalton, Timothy & Nakelse, Tebila, 2021. "Cereal Land Allocation Under Weather and Price Uncertainties in West Africa," 2021 Conference, August 17-31, 2021, Virtual 315177, International Association of Agricultural Economists.
    13. Diego Ramos Canterle & Fábio Mariano Bayer, 2019. "Variable dispersion beta regressions with parametric link functions," Statistical Papers, Springer, vol. 60(5), pages 1541-1567, October.
    14. Ramalho Esmeralda A. & Ramalho Joaquim J.S. & Coelho Luís M.S., 2018. "Exponential Regression of Fractional-Response Fixed-Effects Models with an Application to Firm Capital Structure," Journal of Econometric Methods, De Gruyter, vol. 7(1), pages 1-18, January.
    15. Joaquim Ramalho & J. Silva, 2013. "Functional form issues in the regression analysis of financial leverage ratios," Empirical Economics, Springer, vol. 44(2), pages 799-831, April.
    16. Saroyan, Susanna, 2024. "Counterparty choice, maturity shifts and market freezes: Lessons from the European interbank market," Journal of Economic Dynamics and Control, Elsevier, vol. 160(C).
    17. Alexandridis, George & Antypas, Nikolaos & Gulnur, Arman & Visvikis, Ilias, 2020. "Corporate financial leverage and M&As choices: Evidence from the shipping industry," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 133(C).
    18. Mohieddine Rahmouni, 2021. "Determinants of capacity utilisation by firms in developing countries: evidence from Tunisia," International Journal of Technological Learning, Innovation and Development, Inderscience Enterprises Ltd, vol. 13(3), pages 212-245.
    19. Alperovych, Yan & Hübner, Georges & Lobet, Fabrice, 2015. "How does governmental versus private venture capital backing affect a firm's efficiency? Evidence from Belgium," Journal of Business Venturing, Elsevier, vol. 30(4), pages 508-525.
    20. Fischer, Benjamin & Hügle, Dominik, 2020. "The private and fiscal returns to higher education: A simulation approach for a young German cohort," Discussion Papers 2020/21, Free University Berlin, School of Business & Economics.

    More about this item

    JEL classification:

    • C12 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Hypothesis Testing: General
    • C25 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Discrete Regression and Qualitative Choice Models; Discrete Regressors; Proportions; Probabilities

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bla:manchs:v:82:y:2014:i:4:p:488-507. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Wiley Content Delivery (email available below). General contact details of provider: https://edirc.repec.org/data/semanuk.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.