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Encompassing and Specificity

Published online by Cambridge University Press:  11 February 2009

Jean-Pierre Florens ,
David F. Hendry  and
Jean-François Richard
Jean-Pierre Florens
Affiliation:
Toulouse University
David F. Hendry
Affiliation:
Nuffield College
Jean-François Richard
Affiliation:
University of Pittsburgh
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Abstract

A model M is said to encompass another model N if the former can explain the results obtained by the latter. In this paper, we propose a general notion of encompassing that covers both classical and Bayesian viewpoints and essentially represents a concept of sufficiency among models. We introduce the parent notion of specificity that aims at measuring lack of encompassing. Tests for encompassing are discussed and the test statistics are compared to Bayesian posterior odds. Operational approximations are offered to cover situations where exact solutions cannot be obtained.

Type
Research Article
Information
Econometric Theory , Volume 12 , Issue 4 , October 1996 , pp. 620 - 656
Copyright
Copyright © Cambridge University Press 1996

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