A note on the power superiority of the restricted likelihood ratio test
โ Scribed by Jens Praestgaard
- Book ID
- 113726657
- Publisher
- Elsevier Science
- Year
- 2012
- Tongue
- English
- Weight
- 316 KB
- Volume
- 104
- Category
- Article
- ISSN
- 0047-259X
No coin nor oath required. For personal study only.
๐ SIMILAR VOLUMES
We prove that the power function of the likelihood ratio test for MANOVA attains its minimum when the rank of the location parameter matrix G decreases from s to 1. This provides a theoretical justification of a result that is known in the literature based only on numerical studies.
Suppose that spot and futures prices are generated from an errorcorrection model. This note demonstrates that, although the OLS model is misspecified, it provides a hedge ratio that usually outperforms the hedge ratio derived from the correct error-correction model. The opposite result is possible o