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Power of Tests for Nonlinear Transformation in Regression Analysis

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  • Kobayashi, Masahito

Abstract

This paper compares the local power of tests for a nonlinear transformation of the dependent variable in a regression model against the alternative hypothesis of a linear transformation. It is shown that the local power of the Cox test is higher than those of the extended projection test of MacKinnon, White, and Davidson, and Bera and McAleer's test. The theoretical result is supported by a Monte-Carlo experiment in testing for a regression model with a logarithmically transformed dependent variable against a linear regression model.

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  • Kobayashi, Masahito, 1994. "Power of Tests for Nonlinear Transformation in Regression Analysis," Econometric Theory, Cambridge University Press, vol. 10(2), pages 357-371, June.
    • Handle: RePEc:cup:etheor:v:10:y:1994:i:02:p:357-371_00
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    1. Corradi, Valentina & Swanson, Norman R., 2006. "The effect of data transformation on common cycle, cointegration, and unit root tests: Monte Carlo results and a simple test," Journal of Econometrics, Elsevier, vol. 132(1), pages 195-229, May.

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