BOOK REVIEW overhead and will give some difficulty. While the gain in generality is worth while, the author could perhaps have been freer in giving familiar examples, to make the mathematics less forbidding. In his treatment of specification testing, White shows that the Newey-Tauchen in-tests provide a unifying principle embracing most varieties of specification test, including Lagrange Multiplier tests. Hausman tests, Cox tests, and encompassing tests. But apart from pointing out the possibility of using the in-test framework to set up joint tests of specification, he does not have a great deal to say about model-building strategies and, curiously, does not enlarge on the ideas in White (1990) in any detail. He does have some interesting observations on the various concepts of exogeneity, and suggests an alternative to the well-known treatment of Engle, Hendry, and Richard (1983). These authors implicitly assume a correspondence between the estimated model and the DGP, notwithstanding that weak exogeneity is a property of the parameterization of interest, rather than of data. White finds it helpful to distinguish the notions of explanatory variables (as noted above), informational exogeneity, and conditional invariance. The first of these concepts relate entirely to the specified model, not to
Journal of Applied Econometrics – Wiley
Published: Oct 1, 1995
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