A Martingale Difference-Divergence-based test for specification

• Main Authors: SU, Liangjun, ZHENG, Xin
• Format: text
• Language: English
• Published: Institutional Knowledge at Singapore Management University 2017
• Subjects: Distance covariance; Integrated conditional moment test; Martingale difference divergence; Martingale difference correlation; Specification test; Behavioral Economics; Econometrics
• Online Access: https://ink.library.smu.edu.sg/soe_research/2054; https://ink.library.smu.edu.sg/context/soe_research/article/3053/viewcontent/1_s20_S0165176517301805_main.pdf
• Institution: Singapore Management University

In this paper we propose a novel consistent model specification test based on the martingale difference divergence (MDD) of the error term given the covariates. The MDD equals zero if and only if error term is conditionally mean independent of the covariates. Our MDD test does not require any nonpar...