TY  - JOUR
AU  - West,Kenneth D.
TI  - Encompassing Tests When No Model Is Encompassing
JF  - National Bureau of Economic Research Technical Working Paper Series
VL  - No. 256
PY  - 2000
Y2  - June 2000
UR  - http://www.nber.org/papers/t0256
L1  - http://www.nber.org/papers/t0256.pdf
N1  - Author contact info:
Kenneth D. West
Department of Economics
University of Wisconsin
1180 Observatory Drive
Madison, WI  53706
Tel: 608/262-0033
Fax: 608/262-2033
E-Mail: kdwest@wisc.edu
AB  - This paper considers regression-based tests for encompassing, when none of the models under consideration encompasses all the other models.  For both in- and out-of-sample applications, I derive asymptotic distributions and propose feasible procedures to construct confidence intervals and test statistics. Procedures that are asymptotically valid under the null of encompassing (e.g., Davidson and MacKinnon (1981)) can have large asymptotic and finite sample distortions.  Simulations indicate that the proposed procedures can work well in samples of size typically available, though the divergence between actual and nominal confidence interval coverage sometimes is large.
ER  -