Empirical size and power of some diagnostic tests applied to a distributed lag model (Journal article)

Hatzinikolaou, D./ Stavrakoudis, A.

We produce Monte Carlo evidence on the size and power of the RESET, a heteroscedasticity test, and a test for autocorrelation applied to realistic distributed-lag models. We find that the autocorrelation test has the correct size and high power to detect not only autocorrelation (given a correct model), but also the erroneous omission of several lags of an explanatory variable, whereas the RESET and heteroscedasticity tests are oversized in the presence of positive disturbance autocorrelation, especially when the regressors are also positively autocorrelated, and have no power to detect such misspecification errors. In large samples, size distortion may be avoided by using autocorrelation-robust methods.
Institution and School/Department of submitter: Πανεπιστήμιο Ιωαννίνων. Σχολή Οικονομικών και Κοινωνικών Επιστημών. Τμήμα Οικονομικών Επιστημών
Keywords: size,power,simulation,reset,diagnostic tests,specification error tests,sensitivity
URI: http://olympias.lib.uoi.gr/jspui/handle/123456789/11217
ISSN: 0377-7332
Link: <Go to ISI>://000239869000006
Publisher: Springer-Verlag
Appears in Collections:Άρθρα σε επιστημονικά περιοδικά ( Ανοικτά)

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