Testing conditional moment restriction models using empirical likelihood

An empirical likelihood test is proposed for parameters of models defined by conditional moment restrictions, such as models with non-linear endogenous covariates, with or without heteroscedastic errors or non-separable transformation models. The number of empirical likelihood constraints is given by the size of the parameter, unlike alternative semi-parametric approaches. We show that the empirical likelihood ratio test is asymptotically pivotal, without explicit studentisation. A simulation study shows that the observed size is close to the nominal level, unlike alternative empirical likelihood approaches. It also offers a major advantages over two-stage least-squares, because the relationship between the endogenous and instrumental variables does not need to be known. An empirical likelihood model specification test is also proposed.

Empirical Likelihood Ratio Test for Seemingly Unrelated Regression Models

This paper considers the problem of testing independence of equations in a seemingly unrelated regression model. A novel empirical likelihood test approach is proposed, and under the null hypothesis it is shown to follow asymptotically a chi-square distribution. Finally, simulation studies and a real data example are conducted to illustrate the performance of the proposed method.

Empirical likelihood test for a large-dimensional mean vector

Summary This paper is concerned with empirical likelihood inference on the population mean when the dimension $p$ and the sample size $n$ satisfy $p/n\rightarrow c\in [1,\infty)$. As shown in Tsao (2004), the empirical likelihood method fails with high probability when $p/n>1/2$ because the convex hull of the $n$ observations in $\mathbb{R}^p$ becomes too small to cover the true mean value. Moreover, when $p> n$, the sample covariance matrix becomes singular, and this results in the breakdown of the first sandwich approximation for the log empirical likelihood ratio. To deal with these two challenges, we propose a new strategy of adding two artificial data points to the observed data. We establish the asymptotic normality of the proposed empirical likelihood ratio test. The proposed test statistic does not involve the inverse of the sample covariance matrix. Furthermore, its form is explicit, so the test can easily be carried out with low computational cost. Our numerical comparison shows that the proposed test outperforms some existing tests for high-dimensional mean vectors in terms of power. We also illustrate the proposed procedure with an empirical analysis of stock data.

A Simple Empirical Likelihood Ratio Test for Normality Based on the Moment Constraints of a Half-Normal Distribution

A simple and efficient empirical likelihood ratio (ELR) test for normality based on moment constraints of the half-normal distribution was developed. The proposed test can also be easily modified to test for departures from half-normality and is relatively simple to implement in various statistical packages with no ordering of observations required. Using Monte Carlo simulations, our test proved to be superior to other well-known existing goodness-of-fit (GoF) tests considered under symmetric alternative distributions for small to moderate sample sizes. A real data example revealed the robustness and applicability of the proposed test as well as its superiority in power over other common existing tests studied.

A Nonparametric Phase I Control Chart for Monitoring the Process Variability with Individual Observations Based on Empirical Likelihood Ratio

Among the statistical process control (SPC) techniques, the control chart has been proven to be effective in process monitoring. The Shewhart chart is one of the most commonly used control charts for monitoring the process mean and variability based on the assumption that the distribution of the quality characteristic is normal. However, in practice, many quality characteristics are not normally distributed. Most of the existing nonparametric control charts are designed for Phase II monitoring. Little has been done in developing the nonparametric Phase I control charts especially for individual observations. In this work, we propose a new nonparametric Phase I control chart for monitoring the scale parameter based on the empirical likelihood ratio test. The simulation results show that the proposed chart is more effective than the existing charts in terms of signal probability. A real example is used to demonstrate how the proposed chart can be applied in practice.