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arXiv · 2509.13492

Generalized Covariance Estimator under Misspecification

Aryan Manafi Neyazi
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Abstract

This paper investigates the properties of the Generalized Covariance (GCov) estimator under misspecification with application to processes with local explosive patterns, such as causal-noncausal processes. We show that GCov is consistent and has an asymptotically Normal distribution under misspecification. Then, we construct GCov-based Wald-type and score-type tests to test one specification against the other, all of which follow a $\chi^2$ distribution. We validate the finite-sample performance of the proposed estimators and tests in the context of causal-noncausal models. Finally, we provide applications of the noncausal model to the final energy demand commodity index.

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Aryan Manafi Neyazi. 2025-09-16. Generalized Covariance Estimator under Misspecification. https://arxiv.org/abs/2509.13492

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