Some Aspects of Non-Normality Tests in Systems of Regressions Equations

• In this paper, a short background of the Jarque and McKenzie (JM) test for non-normality is given, and the small sample properties of the test is examined in view of robustness, size and power. The investigation has been performed using Monte Carlo simulations where factors like, e.g., the number of equations, nominal sizes, degrees of freedom, have been varied.Generally, the JM test has shown to have good power properties. The estimated size due to the asymptotic distribution is not very encouraging though. The slow rate of convergence to its asymptotic distribution suggests that empirical critical values should be used in small samples.In addition, the experiment shows that the properties of the JM test may be disastrous when the disturbances are autocorrelated. Moreover, the simulations show that the distribution of the regressors may also have a substantial impact on the test, and that homogenised OLS residuals should be used when testing for non-normality in small samples.

Subject headings

NATURVETENSKAP  -- Matematik -- Sannolikhetsteori och statistik (hsv//swe)

NATURAL SCIENCES  -- Mathematics -- Probability Theory and Statistics (hsv//eng)

SAMHÄLLSVETENSKAP  -- Ekonomi och näringsliv -- Nationalekonomi (hsv//swe)

SOCIAL SCIENCES  -- Economics and Business -- Economics (hsv//eng)

Keyword

Non-normality test

Systems of equations

Residuals

Monte Carlo

Statistics/Econometrics

Publication and Content Type

ref (subject category)

art (subject category)