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Formalized Data Snooping Based on Generalized Error Rates

Author

Listed:
  • Joseph P
  • Romano
  • Azeem M. Shaikh
  • Michael Wolf

Abstract

It is common in econometric applications that several hypothesis tests are carried out at the same time. The problem then becomes how to decide which hypotheses to reject, accounting for the multitude of tests. The classical approach is to control the familywise error rate (FWE), that is, the probability of one or more false rejections. But when the number of hypotheses under consideration is large, control of the FWE can become too demanding. As a result, the number of false hypotheses rejected may be small or even zero. This suggests replacing control of the FWE by a more liberal measure. To this end, we review a number of proposals from the statistical literature. We briefly discuss how these procedures apply to the general problem of model selection. A simulation study and two empirical applications illustrate the methods.

Suggested Citation

  • Joseph P & Romano & Azeem M. Shaikh & Michael Wolf, 2005. "Formalized Data Snooping Based on Generalized Error Rates," IEW - Working Papers 259, Institute for Empirical Research in Economics - University of Zurich.
    • Handle: RePEc:zur:iewwpx:259
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    References listed on IDEAS

    as
    1. Joseph P. Romano & Michael Wolf, 2005. "Stepwise Multiple Testing as Formalized Data Snooping," Econometrica, Econometric Society, vol. 73(4), pages 1237-1282, July.
    2. Romano, Joseph P. & Wolf, Michael, 2001. "Improved nonparametric confidence intervals in time series regressions," DES - Working Papers. Statistics and Econometrics. WS ws010201, Universidad Carlos III de Madrid. Departamento de Estadística.
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    More about this item

    Keywords

    Data snooping; false discovery proportion; false discovery rate; generalized familywise error rate; model selection; multiple testing; stepwise methods;
    All these keywords.

    JEL classification:

    • C12 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Hypothesis Testing: General
    • C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General
    • C52 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Evaluation, Validation, and Selection

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