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"Adjusting the Tests for Skewness and Kurtosis for Distributional Misspecifications"

Anil K. Bera and Gamini Premaratne

 

First Author :

Anil K. Bera
Economics
University of Illinois at Urbana-Champaign
1206 S. Sixth Street, M/C 706
Champaign, IL 61820
USA

abera@uiuc.edu

http://www.business.uiuc.edu/faculty/bera.html


Second Author :

Gamini Premaratne
Economics
National University of Singapore

gamini@galton.econ.uiuc.edu

 
 
Abstract :
 
The standard root-b1 test is widely used for testing skewness. However, several studies have demonstrated that this test is not reliable for discriminating between symmetric and asymmetric distributions in the presence of excess kurtosis. The main reason for the failure of the standard root-b1 test is that its variance formula is derived under the assumption of no excess kurtosis. In this paper we theoretically derive adjustment to the root-b1 test under the framework of Roa’s Score (or the Lagrange multiplier) test principle. Our adjusted test automatically corrects the variance formula and does not lead to over- or under-rejection of the correct null hypothesis. In a similar way, we also suggest an adjusted test for kurtosis in the presence of asymmetry. These tests are then applied to both simulated and real data. The finite sample performances of the adjusted tests are far superior compared to those of their unadjusted counterparts
 
 
Manuscript Received : 2001
Manuscript Published : 2001
 
 
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