With Or Without U? - The Appropriate Test For A U Shaped Relationship.
Source: Duke University (Fuqua-Global)
Non-linear relationships are common in economic theory, and such relationships are also frequently tested empirically. The author argues that the usual test of non-linear relationships is flawed, and derive the appropriate test for a U shaped relationship. This test gives the exact necessary and sufficient conditions for the test of a U shape in both finite samples and for a large class of models.