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Power of Tests for Nonlinear Transformation in Regression Analysis

Published online by Cambridge University Press:  11 February 2009

Masahito Kobayashi
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Abstract

This paper compares the local power of tests for a nonlinear transformation of the dependent variable in a regression model against the alternative hypothesis of a linear transformation. It is shown that the local power of the Cox test is higher than those of the extended projection test of MacKinnon, White, and Davidson, and Bera and McAleer's test. The theoretical result is supported by a Monte-Carlo experiment in testing for a regression model with a logarithmically transformed dependent variable against a linear regression model.

Type
Research Article
Information
Econometric Theory , Volume 10 , Issue 2 , June 1994 , pp. 357 - 371
Copyright
Copyright © Cambridge University Press 1994

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