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Econometrics Commons

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2018

Discipline
Institution
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Full-Text Articles in Econometrics

Sequentially Testing Polynomial Model Hypotheses Using Power Transforms Of Regressors, Jin Seo Cho, Peter C. B. Phillips Jan 2018

Sequentially Testing Polynomial Model Hypotheses Using Power Transforms Of Regressors, Jin Seo Cho, Peter C. B. Phillips

Research Collection School Of Economics

We provide a methodology for testing a polynomial model hypothesis by generalizing the approach and results of Baek, Cho, and Phillips (Journal of Econometrics, 2015, 187, 376–384; BCP), which test for neglected nonlinearity using power transforms of regressors against arbitrary nonlinearity. We use the BCP quasi-likelihood ratio test and deal with the new multifold identification problem that arises under the null of the polynomial model. The approach leads to convenient asymptotic theory for inference, has omnibus power against general nonlinear alternatives, and allows estimation of an unknown polynomial degree in a model by way of sequential testing, a technique that …