Abstract
Ralph Bradley and Robert McClelland (1996)
"An Improved Nonparametric Test for Misspecification of
Functional Form."
In this paper, we develop a two-stage test for
misspecification of a conditional mean that is similar to one
recently developed by Bierens (1990). Our test uses the idea
that in misspecified models the explanatory variables, X,
better predict the residuals, uhat, than their mean. Thus, an
appealing function that detects misspecification is
E(uhat|X). We estimate this with a kernel regression which is
then a component of the second stage which tests for the
nonzero correlation of uhat and the kernel estimate. By
directly estimating the misspecification our approach should
have good power while making fewer a priori restrictions than
Bierens, while also helping researchers better understand the
nature of any misspecification.
Last Modified Date: July 19, 2008
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