Consistent specification testing for conditional moment restrictions

Abstract

This paper introduces specification tests for conditional moment restrictions. The proposed tests are generalizations of the Kolmogorov-Smirnov and Cramer-von Mises tests and they are consistent against all alternatives to the null hypothesis, powerful against 1/n local alternatives and not dependent on any smoothing parameter. A nonparametric bootstrap procedure based on recentered criterion function is suggested to obtain critical values for the tests and is justified asymptotically. © Elsevier Science B.V.