The New Palgrave Dictionary of Economics

2018 Edition
| Editors: Macmillan Publishers Ltd

Non-nested Hypotheses

  • M. Hashem Pesaran
  • M. Rodrigo Dupleich Ulloa
Reference work entry


This article provides an overview of the literature on hypotheses testing when the hypotheses or models under consideration are non-nested. Two models are said to be non-nested if neither can be obtained from the other by some limiting process, including the imposition of equality and/or inequality constrains on one of the model’s parameters. Relevant concepts such as closeness measures and pseudo-true values are discussed and alternative approaches to testing non-nested hypotheses, including the Cox procedure, artificial nesting and the encompassing approach, are reviewed. The Vuong approach to model selection is also covered.


Artificial nesting Cox’s test Encompassing test Hypothesis testing Kullback-Leibler information criteria Linear regression models Maximum likelihood estimation Model selection Non-nested hypotheses Pseudo-true values 

JEL Classifications

C1 C20 C52 
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Copyright information

© Macmillan Publishers Ltd. 2018

Authors and Affiliations

  • M. Hashem Pesaran
    • 1
  • M. Rodrigo Dupleich Ulloa
    • 1
  1. 1.