Mixed LR-$C(α)$-type tests for irregular hypotheses, general criterion functions and misspecified models
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| Format: | Preprint |
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2025
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| author | Dufour, Jean-Marie Tuvaandorj, Purevdorj |
| author_facet | Dufour, Jean-Marie Tuvaandorj, Purevdorj |
| contents | This paper introduces a likelihood ratio (LR)-type test that possesses the robustness properties of \(C(α)\)-type procedures in an extremum estimation setting.
The test statistic is constructed by applying separate adjustments to the restricted and unrestricted criterion functions, and is shown to be asymptotically pivotal under minimal conditions. It features two main robustness properties. First, unlike standard LR-type statistics, its null asymptotic distribution remains chi-square even under model misspecification, where the information matrix equality fails. Second, it accommodates irregular hypotheses involving constrained parameter spaces, such as boundary parameters, relying solely on root-\(n\)-consistent estimators for nuisance parameters. When the model is correctly specified, no boundary constraints are present, and parameters are estimated by extremum estimators, the proposed test reduces to the standard LR-type statistic.
Simulations with ARCH models, where volatility parameters are constrained to be nonnegative, and parametric survival regressions with potentially monotone increasing hazard functions, demonstrate that our test maintains accurate size and exhibits good power. An empirical application to a two-way error components model shows that the proposed test can provide more informative inference than the conventional \(t\)-test. |
| format | Preprint |
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arxiv_https___arxiv_org_abs_2510_17070 |
| institution | arXiv |
| publishDate | 2025 |
| record_format | arxiv |
| spellingShingle | Mixed LR-$C(α)$-type tests for irregular hypotheses, general criterion functions and misspecified models Dufour, Jean-Marie Tuvaandorj, Purevdorj Econometrics This paper introduces a likelihood ratio (LR)-type test that possesses the robustness properties of \(C(α)\)-type procedures in an extremum estimation setting. The test statistic is constructed by applying separate adjustments to the restricted and unrestricted criterion functions, and is shown to be asymptotically pivotal under minimal conditions. It features two main robustness properties. First, unlike standard LR-type statistics, its null asymptotic distribution remains chi-square even under model misspecification, where the information matrix equality fails. Second, it accommodates irregular hypotheses involving constrained parameter spaces, such as boundary parameters, relying solely on root-\(n\)-consistent estimators for nuisance parameters. When the model is correctly specified, no boundary constraints are present, and parameters are estimated by extremum estimators, the proposed test reduces to the standard LR-type statistic. Simulations with ARCH models, where volatility parameters are constrained to be nonnegative, and parametric survival regressions with potentially monotone increasing hazard functions, demonstrate that our test maintains accurate size and exhibits good power. An empirical application to a two-way error components model shows that the proposed test can provide more informative inference than the conventional \(t\)-test. |
| title | Mixed LR-$C(α)$-type tests for irregular hypotheses, general criterion functions and misspecified models |
| topic | Econometrics |
| url | https://arxiv.org/abs/2510.17070 |