The Pseudo-True Score Encompassing Test for Non-Nested Hypotheses
نویسندگان
چکیده
Well known encompassing tests are usually difficult to implement because it is difficult to compute the pseudo-true value of the quasi-maximum likelihood estimator. In this paper, we propose a more operational encompassing test that does not involve such pseudo-true value. Instead, the proposed test relies on the “pseudo-true score” which is relatively easier to evaluate. We show that this test is asymptotically equivalent to the Wald and score encompassing tests and has a wider applicability than the conditional mean encompassing test of Wooldridge (1990a). Our simulations confirm that the proposed test compares favorably with the J and JA tests. JEL Classification: C22, C52
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