On the Robustness of Tests of Outliers and Functional Form
The purpose of this paper is to examine the robustness in finite samples of a test for outliers based on the maximum internally studentized residual and the RESET test for functional form misspecification. The effects of incorrect specification on the adequate detection of outliers and the presence of one or more outliers on the rejection frequencies of RESET are analysed. It is found that, ingeneral, the test for outliers does not seem to be robust to functional form misspecification, while the rejection frequencies of RESET can be reduced, sometimes dramatically, in the presence of outliers.
Journal of Applied Statistics
Taylor and Francis
McAleer, Michael and TSE, Yiu Kuen.
On the Robustness of Tests of Outliers and Functional Form. (1992). Journal of Applied Statistics. 19, (4), 427-436. Research Collection School Of Economics.
Available at: http://ink.library.smu.edu.sg/soe_research/256