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A SIMPLE OMNIBUS OVERIDENTIFICATION SPECIFICATION TEST FOR TIME SERIES ECONOMETRIC MODELS

Published online by Cambridge University Press:  27 October 2014

Manuel A. Domínguez  and
Ignacio N. Lobato
Manuel A. Domínguez
Affiliation:
Universidad Complutense de Madrid
Ignacio N. Lobato*
Affiliation:
Instituto Tecnológico Autónomo de México
*
*Address correspondence to Ignacio Lobato, Centro de Investigación Económica, Instituto Tecnológico Autónomo de México (ITAM), Av. Camino a Santa Teresa #930, 10700 México, D.F., Mexico; e-mail: ilobato@itam.mx.
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Abstract

Despite their theoretical advantages, Integrated Conditional Moment (ICM) specification tests are not commonly employed in the econometrics practice. An important reason is that the employed test statistics are nonpivotal, and so critical values are not readily available. This article proposes an omnibus test in the spirit of the ICM tests of Bierens and Ploberger (1997, Econometrica 65, 1129–1151) where the test statistic is based on the minimized value of a quadratic function of the residuals of time series econometric models. The proposed test falls under the category of overidentification restriction tests started by Sargan (1958, Econometrica 26, 393–415). The corresponding projection interpretation leads us to propose a straightforward wild bootstrap procedure that requires only linear regressions to estimate the critical values irrespective of the model functional form. Hence, contrary to other existing ICM tests, the critical values are easily calculated while the test preserves the admissibility property of ICM tests.

Type
MISCELLANEA
Information
Econometric Theory , Volume 31 , Issue 4 , August 2015 , pp. 891 - 910
Copyright
Copyright © Cambridge University Press 2014 

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Footnotes

We thank an associate editor and a referee for useful comments, and Marine Carrasco, Miguel Delgado, and Juan Carlos Escanciano for useful conversations. Lobato acknowledges financial support from the Mexican CONACYT, reference number 151624, and from Asociación Mexicana de Cultura. This article was also supported by Spanish Ministry of Education, Plan Nacional I+D+i, SEJ2007-62908.

References

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