In the case of nested hypothesis testing there exist many model selection criteria with which a “best” model is chosen. It is however very likely that the estimated hypotheses are all “incorrect”. In this paper model choice is made while assuming the existence of a “true” model. After the introduction of the distance as a measure of difference between models, it is demonstrated that model selection is influenced by the correct specification. Eight choice criteria are compared with respect to this influence.

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Applied Mathematics and Computation
Erasmus School of Economics

Franses, Ph.H.B.F. (1989). The distance between regression models and its impact on model selection. Applied Mathematics and Computation, 1–16. doi:10.1016/0096-3003(89)90002-7