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Bonferroni-Based Size-Correction for Nonstandard Testing Problems

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Abstract

We develop powerful new size-correction procedures for nonstandard hypothesis testing environments in which the asymptotic distribution of a test statistic is discontinuous in a parameter under the null hypothesis. Examples of this form of testing problem are pervasive in econometrics and complicate inference by making size di- cult to control. This paper introduces two sets of new size-correction methods that correspond to two di erent general hypothesis testing frameworks. The new methods are designed to maximize the power of the underlying test while maintaining correct asymptotic size uniformly over the parameter space speci ed by the null hypothesis. They involve the construction of critical values that make use of reasoning derived from Bonferroni bounds. The rst set of new methods provides complementary alternatives to existing size-correction methods, entailing substantially higher power for many testing problems. The second set of new methods provides the rst available asymptotically size-correct tests for the general class of testing problems to which it applies. This class includes hypothesis tests on parameters after consistent model selection and tests on super-ecient/hard-thresholding estimators. We detail the construction and performance of the new tests in three speci c examples: testing after conservative model selection, testing when a nuisance parameter may be on a boundary and testing after consistent model selection.

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File URL: http://www.brown.edu/Departments/Economics/Papers/2012/2012-16_paper.pdf
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Bibliographic Info

Paper provided by Brown University, Department of Economics in its series Working Papers with number 2012-16.

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Date of creation: 2012
Date of revision:
Handle: RePEc:bro:econwp:2012-16

Contact details of provider:
Postal: Department of Economics, Brown University, Providence, RI 02912

Related research

Keywords: Hypothesis testing; uniform inference; asymptotic size; exact size; power; size-correction; model selection; boundary problems; local asymptotics;

This paper has been announced in the following NEP Reports:

References

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  1. Leeb, Hannes & P tscher, Benedikt M., 2008. "Can One Estimate The Unconditional Distribution Of Post-Model-Selection Estimators?," Econometric Theory, Cambridge University Press, vol. 24(02), pages 338-376, April.
  2. Andrews, Donald W.K. & Guggenberger, Patrik, 2009. "Incorrect asymptotic size of subsampling procedures based on post-consistent model selection estimators," Journal of Econometrics, Elsevier, vol. 152(1), pages 19-27, September.
  3. Donald W.K. Andrews & Xu Cheng, 2010. "Estimation and Inference with Weak, Semi-strong, and Strong Identification," Cowles Foundation Discussion Papers 1773R, Cowles Foundation for Research in Economics, Yale University, revised Jul 2011.
  4. Kabaila, Paul, 1998. "Valid Confidence Intervals In Regression After Variable Selection," Econometric Theory, Cambridge University Press, vol. 14(04), pages 463-482, August.
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  6. Donald W.K. Andrews & Patrik Guggenberger, 2007. "Applications of Subsampling, Hybrid, and Size-Correction Methods," Cowles Foundation Discussion Papers 1608, Cowles Foundation for Research in Economics, Yale University.
  7. Moon, Hyungsik Roger & Schorfheide, Frank, 2009. "Estimation with overidentifying inequality moment conditions," Journal of Econometrics, Elsevier, vol. 153(2), pages 136-154, December.
  8. Hansen, Bruce E., 2005. "Challenges For Econometric Model Selection," Econometric Theory, Cambridge University Press, vol. 21(01), pages 60-68, February.
  9. Jorg Stoye, 2009. "More on Confidence Intervals for Partially Identified Parameters," Econometrica, Econometric Society, vol. 77(4), pages 1299-1315, 07.
  10. Donald W.K. Andrews, 1999. "Testing When a Parameter Is on the Boundary of the Maintained Hypothesis," Cowles Foundation Discussion Papers 1229, Cowles Foundation for Research in Economics, Yale University.
  11. Douglas Staiger & James H. Stock, 1994. "Instrumental Variables Regression with Weak Instruments," NBER Technical Working Papers 0151, National Bureau of Economic Research, Inc.
  12. Pötscher, Benedikt M. & Leeb, Hannes, 2009. "On the distribution of penalized maximum likelihood estimators: The LASSO, SCAD, and thresholding," Journal of Multivariate Analysis, Elsevier, vol. 100(9), pages 2065-2082, October.
  13. Chaudhuri, Saraswata & Zivot, Eric, 2011. "A new method of projection-based inference in GMM with weakly identified nuisance parameters," Journal of Econometrics, Elsevier, vol. 164(2), pages 239-251, October.
  14. Joseph P. Romano & Azeem M. Shaikh & Michael Wolf, 2012. "A simple two-step method for testing moment inequalities with an application to inference in partially identified models," ECON - Working Papers 090, Department of Economics - University of Zurich.
  15. Donald W. K. Andrews & Patrik Guggenberger, 2009. "Hybrid and Size-Corrected Subsampling Methods," Econometrica, Econometric Society, vol. 77(3), pages 721-762, 05.
  16. Donald W.K. Andrews & Panle Jia, 2008. "Inference for Parameters Defined by Moment Inequalities: A Recommended Moment Selection Procedure," Cowles Foundation Discussion Papers 1676, Cowles Foundation for Research in Economics, Yale University.
  17. Hansen, Peter Reinhard, 2005. "A Test for Superior Predictive Ability," Journal of Business & Economic Statistics, American Statistical Association, vol. 23, pages 365-380, October.
  18. Leeb, Hannes & P tscher, Benedikt M., 2005. "Model Selection And Inference: Facts And Fiction," Econometric Theory, Cambridge University Press, vol. 21(01), pages 21-59, February.
  19. Leeb, Hannes & Pötscher, Benedikt M., 2012. "Testing in the Presence of Nuisance Parameters: Some Comments on Tests Post-Model-Selection and Random Critical Values," MPRA Paper 41459, University Library of Munich, Germany.
  20. Jean-Marie Dufour, 1997. "Some Impossibility Theorems in Econometrics with Applications to Structural and Dynamic Models," Econometrica, Econometric Society, vol. 65(6), pages 1365-1388, November.
  21. Anna Mikusheva, 2007. "Uniform Inference in Autoregressive Models," Econometrica, Econometric Society, vol. 75(5), pages 1411-1452, 09.
  22. Guggenberger, Patrik, 2010. "The Impact Of A Hausman Pretest On The Asymptotic Size Of A Hypothesis Test," Econometric Theory, Cambridge University Press, vol. 26(02), pages 369-382, April.
  23. Andrews, Donald W.K. & Guggenberger, Patrik, 2010. "ASYMPTOTIC SIZE AND A PROBLEM WITH SUBSAMPLING AND WITH THE m OUT OF n BOOTSTRAP," Econometric Theory, Cambridge University Press, vol. 26(02), pages 426-468, April.
  24. Patrik Guggenberger & Frank Kleibergen & Sophocles Mavroeidis & Linchun Chen, 2012. "On the Asymptotic Sizes of Subset Anderson–Rubin and Lagrange Multiplier Tests in Linear Instrumental Variables Regression," Econometrica, Econometric Society, vol. 80(6), pages 2649-2666, November.
  25. Donald W.K. Andrews & Xu Cheng & Patrik Guggenberger, 2011. "Generic Results for Establishing the Asymptotic Size of Confidence Sets and Tests," Cowles Foundation Discussion Papers 1813, Cowles Foundation for Research in Economics, Yale University.
  26. Donald W. K. Andrews, 1999. "Estimation When a Parameter Is on a Boundary," Econometrica, Econometric Society, vol. 67(6), pages 1341-1384, November.
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Citations

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Cited by:
  1. Xu Cheng & Zhipeng Liao, 2012. "Select the Valid and Relevant Moments: A One-Step Procedure for GMM with Many Moments," PIER Working Paper Archive 12-045, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania.
  2. Jui-Chung Yang & Ke-Li Xu, 2013. "Estimation and Inference under Weak Identi cation and Persistence: An Application on Forecast-Based Monetary Policy Reaction Function," 2013 Papers pya307, Job Market Papers.

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