The paper questions the appropriateness of the practice known as 'error-autocorrelation correcting' in linear regression, by showing that adopting an AR(1) error formulation is equivalent to assuming that the regressand does not Granger cause any of the regressors. This result is used to...

The objective of this paper is to apply the mis-specification (M-S) encompassing perspective to the problem of choosing between "linear" and "log-linear" unit-root models. A simple M-S encompassing test, based on an auxiliary regression stemming from the conditional second moment, is proposed...

This paper considers simulation-based procedures to compute the Wald encompassing and the Cox test statistics for non-nested models. These simulation estimation procedures are applied to both the encompassing contrast and its covariance matrix in the case of a Wald non-nested test statistic, and...

The encompassing principle has been carefully and precisely defined in various contexts, since its first appearance in the 1980s literature in numerous papers by Hendry, Mizon and Richard. Since then, several distinct notions of encompassing have been proposed and still coexist in the...