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A generalized goodness-of-functional form test for binary and fractional regression models

Author

Listed:
  • Esmeralda A. Ramalho

    (Departamento de Economia and CEFAGE-UE, Universidade de Évora)

  • Joaquim J.S. Ramalho

    (Departamento de Economia and CEFAGE-UE, Universidade de Évora)

  • José M.R. Murteira

    (Faculdade de Economia, Universidade de Coimbra, and CEMAPRE)

Abstract

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 nonparametric.

Suggested Citation

  • Esmeralda A. Ramalho & Joaquim J.S. Ramalho & José M.R. Murteira, 2013. "A generalized goodness-of-functional form test for binary and fractional regression models," CEFAGE-UE Working Papers 2013_09, University of Evora, CEFAGE-UE (Portugal).
    • Handle: RePEc:cfe:wpcefa:2013_09
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    References listed on IDEAS

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    More about this item

    Keywords

    Binary data; Fractional data; Conditional mean tests; LM tests.;
    All these keywords.

    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

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