Holzmann, Hajo and Min, Aleksey and Czado, Claudia
Validating linear restrictions in linear regression models with general error structure.
Collaborative Research Center 386, Discussion Paper 478
A new method for testing linear restrictions in linear regression models is suggested. It allows to validate the linear restriction, up to a specified approximation error and with a specified error probability. The test relies on asymptotic normality of the test statistic, and therefore normality of the errors in the regression model is not required. In a simulation study the performance of the suggested method for model selection purposes, as compared to standard model selection criteria and the t-test, is examined. As an illustration we analyze the US college spending data from 1994.