Journal
JOURNAL OF ECONOMETRICS
Volume 218, Issue 2, Pages 655-689Publisher
ELSEVIER SCIENCE SA
DOI: 10.1016/j.jeconom.2020.04.033
Keywords
Characteristic function; Complex Gaussian process; Consistent tests; Continuum of moment conditions; Goodness-of-fit; GMM; Tikhonov regularization
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Funding
- Spanish Ministry of Economy, Industry and Competitiveness [ECO 2014-59262, ECO-2017-89689-P]
- Canadian Social Sciences and Humanities Research Council
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We propose specification tests for parametric distributions that compare the potentially complex theoretical and empirical characteristic functions using the continuum of moment conditions analogue to an overidentifying restrictions test, which takes into account the correlation between influence functions for different argument values. We derive its asymptotic distribution for fixed regularization parameter and when this vanishes with the sample size. We show its consistency against any deviation from the null, study its local power and compare it with existing tests. An extensive Monte Carlo exercise confirms that our proposed tests display good power in finite samples against a variety of alternatives. (C) 2020 Elsevier B.V. All rights reserved.
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