On the finite sampling properties of the Zheng test for omitted and irrelevant variable problems

The paper conducts simple Monte Carlo simulation investigations to ascertain the finite sample properties of the Zheng test when applied to familiar specification errors in the form of omitted and irrelevant variable problems. Results indicate that the respective estimated sizes underestimate the nominal sizes. In an omitted variable setting, the Zheng test performs rather well with estimated powers being sensitive to increasing bandwidth parameters. However, the test exhibited contrasting results in examining power performance for testing irrelevant regressors.