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Formalized data snooping based on generalized error rates


Romano, Joseph P; Shaikh, Azeem M; Wolf, Michael (2008). Formalized data snooping based on generalized error rates. Econometric Theory, 24(2):404-447.

Abstract

It is common in econometric applications that several hypothesis tests are carried out simultaneously. 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) which 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 recent 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.

It is common in econometric applications that several hypothesis tests are carried out simultaneously. 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) which 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 recent 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.

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39 citations in Web of Science®
43 citations in Scopus®
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Additional indexing

Item Type:Journal Article, refereed, original work
Communities & Collections:03 Faculty of Economics > Department of Economics
Dewey Decimal Classification:330 Economics
Language:English
Date:2008
Deposited On:08 Jul 2008 15:07
Last Modified:05 Apr 2016 12:24
Publisher:Cambridge University Press
ISSN:0266-4666
Additional Information:Copyright: Cambridge University Press
Publisher DOI:10.1017/S0266466608080171
Permanent URL: http://doi.org/10.5167/uzh-2707

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