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Some Power Comparisons of Joint and Paired Tests for Nonnested Models under Local Hypotheses

Published online by Cambridge University Press:  18 October 2010

Naorayex K. Dastoor  and
Michael McAleer
Naorayex K. Dastoor
Affiliation:
University of Alberta
Michael McAleer
Affiliation:
Australian National University
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Abstract

This paper compares the asymptotic local power properties of some tests of a null model against a single nonnested alternative and against multiple nonnested alternatives, denoted hereafter as paired and joint tests, respectively. It is demonstrated that the ranking of tests on the basis of asymptotic local powers depends on the choice of local hypothesis. When a local null hypothesis is employed, it is not possible to rank the Wald and Cox-type paired or joint tests. However, when the local hypothesis is specified with reference to one of the alternative models under consideration, a ranking of different test procedures becomes possible. Under a local alternative hypothesis, it is shown that the paired Wald test will never have greater asymptotic local power than a paired Cox-type test.

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Type
Articles
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Econometric Theory , Volume 5 , Issue 1 , April 1989 , pp. 83 - 94
Copyright
Copyright © Cambridge University Press 1989

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