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SECOND-ORDER REFINEMENT OF EMPIRICAL LIKELIHOOD FOR TESTING OVERIDENTIFYING RESTRICTIONS

Published online by Cambridge University Press:  30 July 2012

Yukitoshi Matsushita  and
Taisuke Otsu
Yukitoshi Matsushita
Affiliation:
University of Tsukuba
Taisuke Otsu*
Affiliation:
Yale University
*
*Address correspondence to Taisuke Ostu, New Haven, CT 06520-8281, USA; e-mail: [email protected].
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Abstract

This paper studies second-order properties of the empirical likelihood overidentifying restriction test to check the validity of moment condition models. We show that the empirical likelihood test is Bartlett correctable and suggest second-order refinement methods for the test based on the empirical Bartlett correction and adjusted empirical likelihood. Our second-order analysis supplements the one in Chen and Cui (2007, Journal of Econometrics141, 492–516) who considered parameter hypothesis testing for overidentified models. In simulation studies we find that the empirical Bartlett correction and adjusted empirical likelihood assisted by bootstrapping provide reasonable improvements for the properties of the null rejection probabilities.

Type
Articles
Information
Econometric Theory , Volume 29 , Issue 2 , April 2013 , pp. 324 - 353
Copyright
Copyright © Cambridge University Press 2012 

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Footnotes

The authors would like to thank a co-editor, two anonymous referees, and the seminar participants at Hiroshima University and University of Tokyo and Tsukuba for helpful comments.

References

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