 Inference on sets in financeVictor Chernozhukov, Emre Kocatulum and Konrad Menzel Quantitative Economics, 2015, vol. 6, issue 2, 309-358 Abstract: We consider the problem of inference on a class of sets describing a collection of admissible models as solutions to a single smooth inequality. Classical and recent examples include the Hansen–Jagannathan sets of admissible stochastic discount factors, Markowitz–Fama mean–variance sets for asset portfolio returns, and the set of structural elasticities in Chetty's (2012) analysis of demand with optimization frictions. The econometric structure of the problem allows us to construct convenient and powerful confidence regions based on the weighted likelihood ratio and weighted Wald statistics. Our statistics differ from existing statistics in that they enforce either exact or first‐order equivariance to transformations of parameters, making them especially appealing in the target applications. We show that the resulting inference procedures are more powerful than the structured projection methods. Last, our framework is also useful for analyzing intersection bounds, namely sets defined as solutions to multiple smooth inequalities, since multiple inequalities can be conservatively approximated by a single smooth inequality. We present two empirical examples showing how the new econometric methods are able to generate sharp economic conclusions. Date: 2015 Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:wly:quante:v:6:y:2015:i:2:p:309-358 Ordering information: This journal article can be ordered from Access Statistics for this article More articles in Quantitative Economics from Econometric Society Contact information at EDIRC. |
Is your work missing from RePEc? Here is how to contribute.
Questions or problems? Check the EconPapers FAQ or send mail to .
EconPapers is hosted by the
School of Business at Örebro University.