Testing multiple inequality hypotheses: A smoothed indicator approach

Le-Yu Chen and Jerzy Szroeter

Journal of Econometrics, 2014, vol. 178, issue P3, 678-693

Abstract: This paper proposes a class of origin-smooth approximators of indicators underlying the sum-of-negative-part statistic for testing multiple inequalities. The need for simulation or bootstrap to obtain test critical values is thereby obviated. A simple procedure is enabled using fixed critical values. The test is shown to have correct asymptotic size in the uniform sense that supremum finite-sample rejection probability over null-restricted data distributions tends asymptotically to nominal significance level. This applies under weak assumptions allowing for estimator covariance singularity. The test is unbiased for a wide class of local alternatives. A new theorem establishes directions in which the test is locally most powerful. The proposed procedure is compared with predominant existing tests in structure, theory and simulation.

Keywords: Test; Multiple inequalities; One-sided hypothesis; Composite null; Binding constraints; Asymptotic exactness; Covariance singularity; Indicator smoothing (search for similar items in EconPapers)
JEL-codes: C1 C4 (search for similar items in EconPapers)
Date: 2014
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (17)

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Related works:
Working Paper: Testing multiple inequality hypotheses: a smoothed indicator approach (2012)
Working Paper: Testing multiple inequality hypotheses: a smoothed indicator approach (2012)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:econom:v:178:y:2014:i:p3:p:678-693

DOI: 10.1016/j.jeconom.2013.10.004

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