A Consistent ICM-based $\chi^2$ Specification Test

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Tác giả: Feiyu Jiang, Emmanuel Selorm Tsyawo

Ngôn ngữ: eng

Ký hiệu phân loại: 153.932 Conscious mental processes and intelligence

Thông tin xuất bản: 2022

Mô tả vật lý:

Bộ sưu tập: Metadata

ID: 195648

In spite of the omnibus property of Integrated Conditional Moment (ICM) specification tests, they are not commonly used in empirical practice owing to, e.g., the non-pivotality of the test and the high computational cost of available bootstrap schemes especially in large samples. This paper proposes specification and mean independence tests based on a class of ICM metrics termed the generalized martingale difference divergence (GMDD). The proposed tests exhibit consistency, asymptotic $\chi^2$-distribution under the null hypothesis, and computational efficiency. Moreover, they demonstrate robustness to heteroskedasticity of unknown form and can be adapted to enhance power towards specific alternatives. A power comparison with classical bootstrap-based ICM tests using Bahadur slopes is also provided. Monte Carlo simulations are conducted to showcase the proposed tests' excellent size control and competitive power.
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