Exact properties of the conditional likelihood ratio test in an IV regression model


Hillier, Grant (2007) Exact properties of the conditional likelihood ratio test in an IV regression model , London, UK Cemmap 48pp. (Cemmap Working Papers CWP23/06, (doi:10.1920/wp.cem.2006.2306) ).

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Description/Abstract

For a simplified structural equation/IV regression model with one right-side endogenous variable, we obtain the exact conditional distribution function for Moreira's (2003) conditional likelihood ratio (CLR) test. This is then used to obtain the critical value function needed to implement the CLR test, and reasonably comprehensive graphical versions of the function are provided for practical use. The analogous functions are also obtained for the case of testing more than one right-side endogenous coefficient, but only for an approximation to the true likelihood ratio test. We then go on to provide an exact analysis of the power functions of the CLR test, the Anderson-Rubin test, and the LM test suggested by Kleibergen (2002). The CLR test is shown to clearly conditionally dominate the other two tests for virtually all parameter configurations, but none of these test is either inadmissable or uniformly superior to the other two.

Item Type: Monograph (Working Paper)
Digital Object Identifier (DOI): doi:10.1920/wp.cem.2006.2306
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ePrint ID: 42735
Date :
Date Event
1 October 2006Submitted
1 May 2007Published
Date Deposited: 25 Jan 2007
Last Modified: 16 Apr 2017 18:51
Further Information:Google Scholar
URI: http://eprints.soton.ac.uk/id/eprint/42735

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