THE OPTIMAL CRITICAL VALUE OF A PRE‐TEST FOR AN INEQUALITY RESTRICTION IN A MIS‐SPECIFIED REGRESSION MODEL

Research output: Journal Publications and ReviewsRGC 22 - Publication in policy or professional journal

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Author(s)

Detail(s)

Original languageEnglish
Pages (from-to)73-81
Journal / PublicationAustralian Journal of Statistics
Volume37
Issue number1
Publication statusPublished - Mar 1995
Externally publishedYes

Abstract

Optimal critical values are derived for a pre‐test of an inequality restriction in a model where relevant regressors are unwittingly omitted. The criterion adopted is either that of the minimum average relative risk, or that of the mini‐max regret. The latter approach yields an optimal critical value which is sensitive to the degree of model mis‐specification, while the former criterion always leads to the choice of the unrestricted estimator. Copyright © 1995, Wiley Blackwell. All rights reserved

Research Area(s)

  • Inequality restriction, minimum average relative risk, mini‐max regret, optimal critical values, pre‐test