Bruce E. Hansen

"Challenges for Econometric Model Selection"

Econometric Theory, 2005, 21, 60-68.


Standard econometric model selection methods are based on four fundamental errors in approach: parametric vision, the assumption of a true DGP, evaluation based on fit, and ignoring the impact of model uncertainty on inference. Instead, econometric model selection methods should be based on a semiparametric vision, models should be viewed as approximations, models should be evaluated based on their purpose, and model uncertainty should be incorporated into inference methods. These problems have been examined individually, but not jointly, and my view is that future research into econometric model selection should attempt to address all four issues.

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Some of the above material is based upon work supported by the National Science Foundation under Grants No. SES-9022176, SES-9120576, SBR-9412339, and SBR-9807111. Any opinions, findings, and conclusions, or recommendations expressed in this material are those of the author(s), and do not necessarily reflect the views of the NSF.