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Re: st: Testing of differences in R-square


From   Steve Samuels <sjsamuels@gmail.com>
To   statalist@hsphsun2.harvard.edu
Subject   Re: st: Testing of differences in R-square
Date   Tue, 30 Mar 2010 10:24:50 -0400

Vuong's test is likelihood based and corrects for the differing number
of parameters in two models. For your problem you can directly
compared adjusted R-squares, which also correct for the number of
parameters.. However assessing a difference between two adjusted
R-squares is equivalent to assessing a difference between the mean
square errors. So I suggest you bootstrap a difference in log mean
square errors. Because you want to bootstrap two regressions, you'll
need to write your own program. See:
http://www.ats.ucla.edu/stat/Stata/faq/ownboot.htm

Steve

On Tue, Mar 30, 2010 at 2:24 AM, <Tonny.Stenheim@hibu.no> wrote:
> Hi,
>
> I need to test differences in R-squares obtained from two ordinary least square regressions estimated by using the same sample of observations. For instance, I want to compare R-square of the following two regressions:
>
> P=EARN+BV to
> P=ADJEARN + ADJBV
>
> where P is stock price, EARN is accounting earnings, BV is book value of equity and ADJ means adjusted. In the literature, the Vuong test is frequently been used to test differences in R-square (Vuong, Q. H: Likelihood Ratio Tests for Model Selection and Non-nested Hypothesis, Econometrica, Vol 57, No 2, 1989, pp 307-333).  My questions are:
>
> Is it possible to perform the Vuong test using commands in STATA?
> If it is possible, what commands should I type?
> Are there other tests available for differences in R-squares?
>
> Any help is highly appreciated.
>
> Best regards
>
> Tonny
>
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-- 
Steven Samuels
sjsamuels@gmail.com
18 Cantine's Island
Saugerties NY 12477
USA
Voice: 845-246-0774
Fax: 206-202-4783

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