Size Distortion and Modication of Classical Vuong Tests1
نویسندگان
چکیده
In this paper, I examine the nite sample properties of the Vuong test (Vuong (1989)) for nonnested model comparison. I nd that both the one-step and the two-step classical Vuong tests over-reject the null hypothesis when the null hypothesis is true. The over-rejection can be large in certain scenarios. A simple one-step modi ed test is proposed. The modi ed test applies to both overlapping models and strictly nonnested models, has correct null-rejection probability regardless of the data generating process, and has power comparable to or better than the classical Vuong tests. The results are extended to Vuong-type tests for moment condition models in a straightforward fashion. Keywords: Asymptotic size, Model comparison, Nonnested models, Size-Distortion, Two-step test, Vuong test JEL classi cation number : C12, C52
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