Local sensitivity and diagnostic tests
Jan Magnus () and
Econometrics Journal, 2007, vol. 10, issue 1, 166-192
In this paper, we confront sensitivity analysis with diagnostic testing. Every model is misspecified (in the sense that no model coincides with the data-generating process), but a model is useful if the parameters of interest (the focus) are not sensitive to small perturbations in the underlying assumptions. The study of the effect of these violations on the focus is called sensitivity analysis. Diagnostic testing, on the other hand, attempts to find out whether a nuisance parameter is (statistically) "large" or "small". Both aspects are important, but traditional applied econometrics tends to use only diagnostics and forget about sensitivity analysis. We develop a theory of sensitivity in a maximum likelihood framework, give conditions under which the diagnostic and the sensitivity are asymptotically independent, and demonstrate with three core examples that this independence is the rule rather than the exception, thus underlying the importance of sensitivity analysis. Copyright Royal Economic Society 2007
References: Add references at CitEc
Citations: View citations in EconPapers (13) Track citations by RSS feed
Downloads: (external link)
http://www.blackwell-synergy.com/doi/abs/10.1111/j.1368-423X.2007.00204.x link to full text (text/html)
Access to full text is restricted to subscribers.
Working Paper: Local Sensitivity and Diagnostic Tests (2004)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:ect:emjrnl:v:10:y:2007:i:1:p:166-192
Ordering information: This journal article can be ordered from
Access Statistics for this article
Econometrics Journal is currently edited by Richard J. Smith, Oliver Linton, Pierre Perron, Jaap Abbring and Marius Ooms
More articles in Econometrics Journal from Royal Economic Society Contact information at EDIRC.
Bibliographic data for series maintained by Wiley-Blackwell Digital Licensing ().