CFDP 800

Power in Econometric Applications

Author(s): 

Publication Date: August 1986

Pages: 54

Abstract: 

This paper is concerned with the use of power properties of tests in econometric applications. Power radius and inverse power functions are defined. These functions are designed to yield summary measures of power that facilitate the interpretation of test results in practice. Simple approximations are introduced for the power radius and inverse power functions of Wald, likelihood ration, Lagrange multiplier, and Hausman tests. These approximations readily convey the general qualitative features of the power of a test. Examples are provided to illustrate their usefulness in interpreting test results.

Keywords: 

Power function, Hypothesis tests, Inverse power function

JEL Classification Codes:  211

See CFP: 737