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Generalized empirical likelihood specification test robust to local misspecification

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  • Li, Haiqi
  • Fan, Rui
  • Park, Sung Y.

Abstract

It is well known that many of the standard specification tests may not be robust when the alternative is misspecified. This study analyzes a robust specification test for generalized empirical likelihood (GEL) estimators in a weakly dependent time series setting. We show that the usual score test statistic asymptotically follows a non-central chi-square distribution under the local misspecification in the GEL framework. Thus, it spuriously rejects the null hypothesis too frequently. We propose a robust score specification test that asymptotically follows a central chi-square distribution under the local misspecification. A Monte Carlo simulation verifies the usefulness of the proposed tests.

Suggested Citation

  • Li, Haiqi & Fan, Rui & Park, Sung Y., 2018. "Generalized empirical likelihood specification test robust to local misspecification," Economics Letters, Elsevier, vol. 171(C), pages 149-153.
    • Handle: RePEc:eee:ecolet:v:171:y:2018:i:c:p:149-153
    DOI: 10.1016/j.econlet.2018.07.024
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    References listed on IDEAS

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    More about this item

    Keywords

    Generalized empirical likelihood; Local misspecification; Robust specification test;
    All these keywords.

    JEL classification:

    • C12 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Hypothesis Testing: General
    • C52 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Evaluation, Validation, and Selection

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