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Formalized Data Snooping Based on Generalized Error Rates


Romano, Joseph P; Shaikh, Azeem M; Wolf, Michael (2005). Formalized Data Snooping Based on Generalized Error Rates. Working paper series / Institute for Empirical Research in Economics No. 259, University of Zurich.

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 whichnhypotheses to reject, accounting for the multitude of tests.nThe classical approach is to control the familywise error rate (FWE), that is, thenprobability of one or more false rejections. But when thennumber 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 replacingncontrol of the FWE by a more liberal measure. To this end,nwe review a number of proposals from the statistical literature.nWe 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 at the same time. The problem then becomes how to decide whichnhypotheses to reject, accounting for the multitude of tests.nThe classical approach is to control the familywise error rate (FWE), that is, thenprobability of one or more false rejections. But when thennumber 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 replacingncontrol of the FWE by a more liberal measure. To this end,nwe review a number of proposals from the statistical literature.nWe 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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Additional indexing

Item Type:Working Paper
Communities & Collections:03 Faculty of Economics > Department of Economics
Working Paper Series > Institute for Empirical Research in Economics (former)
Dewey Decimal Classification:330 Economics
Language:English
Date:December 2005
Deposited On:29 Nov 2011 22:31
Last Modified:05 Apr 2016 15:11
Series Name:Working paper series / Institute for Empirical Research in Economics
ISSN:1424-0459
Official URL:http://www.econ.uzh.ch/wp.html
Permanent URL: https://doi.org/10.5167/uzh-52149

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