Nonnested Alternatives(cont) o More difficult if one model uses y and the other uses In() Can follow same basic logic and transform predicted In() to get y for the second step o In any case, Davidson-MacKinnon test may reject neither or both models rather than clearly preferring one specification Economics 20- Prof anderson 7Economics 20 - Prof. Anderson 7 Nonnested Alternatives (cont) More difficult if one model uses y and the other uses ln(y) Can follow same basic logic and transform predicted ln(y) to get ŷ for the second step In any case, Davidson-MacKinnon test may reject neither or both models rather than clearly preferring one specification