EconStor >
Queen Mary, University of London >
School of Economics and Finance, Queen Mary, University of London  >
Working Paper Series, School of Economics and Finance, Queen Mary, University of London  >

Please use this identifier to cite or link to this item:

http://hdl.handle.net/10419/62863
  
Title:Non-nested models and the likelihood ratio statistic: A comparison of simulation and bootstrap based tests PDF Logo
Authors:Kapetanios, George
Weeks, Melvyn J.
Issue Date:2003
Series/Report no.:Working Paper, Department of Economics, Queen Mary, University of London 490
Abstract:We consider an alternative use of simulation in the context of using the Likelihood-Ratio statistic to test non-nested models. To date simulation has been used to estimate the Kullback-Leibler measure of closeness between two densities, which in turn 'mean adjusts' the Likelihood-Ratio statistic. Given that this adjustment is still based upon asymptotic arguments, an alternative procedure is to utilise bootstrap procedures to construct the empirical density. To our knowledge this study represents the first comparison of the properties of bootstrap and simulation-based tests applied to non-nested tests. More specifically, the design of experiments allows us to comment on the relative performance of these two testing frameworks across models with varying degrees of nonlinearity. In this respect although the primary focus of the paper is upon the relative evaluation of simulation and bootstrap-based nonnested procedures in testing across a class of nonlinear threshold models, the inclusion of a similar analysis of the more standard linear/log-linear models provides a point of comparison.
Subjects:Non-nested tests, Simulation-based inference, Bootstrap tests, Nonlinear threshold models
JEL:C15
C52
Document Type:Working Paper
Appears in Collections:Working Paper Series, School of Economics and Finance, Queen Mary, University of London

Files in This Item:
File Description SizeFormat
377030422.pdf276.55 kBAdobe PDF
No. of Downloads: Counter Stats
Download bibliographical data as: BibTeX
Share on:http://hdl.handle.net/10419/62863

Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.