Testing Hildreth-Houck Against Return to Normalcy Random Regression Coefficients

In the context of the linear regression model, this paper considers testing for a single Hildreth-Houck random coefficient against the alternative that the coefficient follows the return to normalcy model. We attempt to construct a point-optimal invariant test but find that we have to resort to the class of approximate point-optimal invariant (APOI) tests introduced by King (1987). Empirical power calculations show that these tests have good small-sample properties compared to the likelihood ratio and Wald tests. A particular APOI test is recommended and is found to be remarkably robust to nonnormality.


Issue Date:
Nov 01 1993
Publication Type:
Working or Discussion Paper
Language:
English
Total Pages:
26
Series Statement:
Working Paper No. 19/93




 Record created 2018-01-30, last modified 2018-01-31

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