Omitted Variable Tests and Dynamic Specification: An Application to Demand Homogeneity
Björn Schmolck
Dec 2012 · Lecture Notes in Economics and Mathematical SystemsBook 488 · Springer Science & Business Media
Ebook
144
Pages
Free sample
About this ebook
This book deals with the omitted variable test for a multivariate time-series regression model. The empirical motivation is the homogeneity test for a consumer demand system. The consequences of using a dynamically misspecified omitted variable test are shown in detail. The analysis starts with the univariate t-test and is then extended to the multivariate regression system. The small sample performance of the dynamically correctly specified omitted variable test is analysed by simulation. Two classes of tests are considered: versions of the likelihood ratio test and the robust Wald test which is based on a heteroskedasticity and autocorrelation consistent variance-covariance estimator (HAC).
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Business & investing
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