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Optimal Tests When a Nuisance Parameter Is Present Only Under the Alternative

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Abstract

This paper derives asymptotically optimal tests for testing problems in which a nuisance parameter exists under the alternative hypothesis but not under the null. The results of the paper are of interest, because the testing problem considered in non-standard and the classical asymptotic optimality results for the Wald, Lagrange multiplier (LM), and likelihood ratio (LR) tests do not apply. In the non-standard cases of main interest, new optimal tests are obtained and the LR test is not found to be an optimal test.

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  • Donald W.K. Andrews & Werner Ploberger, 1992. "Optimal Tests When a Nuisance Parameter Is Present Only Under the Alternative," Cowles Foundation Discussion Papers 1015, Cowles Foundation for Research in Economics, Yale University.
    • Handle: RePEc:cwl:cwldpp:1015
    Note: CFP 879.
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    References listed on IDEAS

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    1. James M. Nason, 1991. "The permanent income hypothesis when the bliss point is stochastic," Discussion Paper / Institute for Empirical Macroeconomics 46, Federal Reserve Bank of Minneapolis.
    2. Andrews, Donald W K, 1987. "Consistency in Nonlinear Econometric Models: A Generic Uniform Law of Large Numbers [On Unification of the Asymptotic Theory of Nonlinear Econometric Models]," Econometrica, Econometric Society, vol. 55(6), pages 1465-1471, November.
    3. King, Maxwell L & Shively, Thomas S, 1993. "Locally Optimal Testing When a Nuisance Parameter Is Present Only under the Alternative," The Review of Economics and Statistics, MIT Press, vol. 75(1), pages 1-7, February.
    4. Hansen, Bruce E, 1996. "Inference When a Nuisance Parameter Is Not Identified under the Null Hypothesis," Econometrica, Econometric Society, vol. 64(2), pages 413-430, March.
    5. Potter, Simon M, 1995. "A Nonlinear Approach to US GNP," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 10(2), pages 109-125, April-Jun.
    6. Andrews, Donald W K & Ploberger, Werner, 1994. "Optimal Tests When a Nuisance Parameter Is Present Only under the Alternative," Econometrica, Econometric Society, vol. 62(6), pages 1383-1414, November.
    7. Andrews, Donald W.K., 1992. "Generic Uniform Convergence," Econometric Theory, Cambridge University Press, vol. 8(2), pages 241-257, June.
    8. Donald W.K. Andrews & Werner Ploberger, 1994. "Testing for Serial Correlation Against an ARMA(1,1) Process," Cowles Foundation Discussion Papers 1077, Cowles Foundation for Research in Economics, Yale University.
    9. Hansen, Bruce E, 2002. "Tests for Parameter Instability in Regressions with I(1) Processes," Journal of Business & Economic Statistics, American Statistical Association, vol. 20(1), pages 45-59, January.
    10. Andrews, Donald W K, 1993. "Tests for Parameter Instability and Structural Change with Unknown Change Point," Econometrica, Econometric Society, vol. 61(4), pages 821-856, July.
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    More about this item

    Keywords

    Asymptotics; changepoint; nonstandard testing problem;
    All these keywords.

    JEL classification:

    • C12 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Hypothesis Testing: General

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