Increasing the power of specification tests

Tiemen M Woutersen, Jerry A. Hausman

Research output: Contribution to journalArticle

2 Citations (Scopus)

Abstract

This paper shows how to increase the power of Hausman's (1978) specification test as well as the difference test in a large class of models. The idea is to impose the restrictions of the null and the alternative hypotheses when estimating the covariance matrix. If the null hypothesis is true then the proposed test has the same distribution as the existing ones in large samples. If the hypothesis is false then the proposed test statistic is larger with probability approaching one as the sample size increases in several important applications, including testing for endogeneity in the linear model.

Original languageEnglish (US)
JournalJournal of Econometrics
DOIs
StateAccepted/In press - Jan 1 2018

Fingerprint

Specification test
Endogeneity
Sample size
Covariance matrix
Testing
Test statistic

Keywords

  • Hausman test
  • Power of tests
  • Specification test

ASJC Scopus subject areas

  • Economics and Econometrics

Cite this

Increasing the power of specification tests. / Woutersen, Tiemen M; Hausman, Jerry A.

In: Journal of Econometrics, 01.01.2018.

Research output: Contribution to journalArticle

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