Empirically Relevant Critical Values For Hypothesis Tests: The Bootstrap to the Rescue

J.L. Horowitz () and N.E. Savin ()
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J.L. Horowitz: University of Iowa
N.E. Savin: University of Iowa

Working Papers from University of Iowa, Department of Economics

Abstract: Tests of statistical hypotheses can be based on either of two critical values: the Type I critical value or the size-corrected critical value. The former usually depends on unknown population parameters and cannot be evaluated exactly in applications, but it can often be estimated very accurately by using the bootstrap. The latter does not depend on unknown population parameters but is likely to yield a test with low power. The critical values used in most Monte Carlo studies of the powers of tests are neither Type I nor size-corrected. They are irrelevant to empirical research.

Keywords: Hypothesis test; critical value; size; Type I error; bootstrap (search for similar items in EconPapers)
JEL-codes: C12 C15 (search for similar items in EconPapers)
Pages: 16 Pages
Date: 1998-07
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:uia:iowaec:98-07

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