Comments on goodness-of-fitmeasures in binary choice models by frank windmeijer

Why study Pseudo-R2,s for limited dependent variable models? After all, even in the much clearer ordinary least squares case, R2 is a poor guide to model selection, at least when used by itself, because it never decreases and typically increases whenever an independent variable is added. There are even cases where R2 will tend to one when there is no relationship among the (nonstationary) variables whatsoever (Granger and Newbold, 1974). Surely applied researchers would not want to bother with such a statistic in the limited dependent variable case, particularly when the intuitive explainedvariation- to- total- variation interpretation is no longer available.