Do We Reject Too Often? Small Sample Properties of Tests of Rational Expectations Models

N. Gregory Mankiw and Matthew D. Shapiro

No 51, NBER Technical Working Papers from National Bureau of Economic Research, Inc

Abstract: We examine the small sample properties of tests of rational expectations models. We show using Monte Carlo experiments that the asymptotic distribution of test statistics can be extremely misleading when the tine series examined are highly autoregressive. In particular, a practitioner relying on the asymptotic distribution will reject true models too frequently. We also show that this problem is especially severe with detrended data. We present correct small sample critical values for our canonical problem.

Date: 1985-10
Note: EFG
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Published as Mankiw, N. Gregory and Matthew D. Shapiro. "Do We Reject Too Often? Small Sample Properties of Tests of Rational Expectations Models," Economic Letters, Vol. 20, pp. 139-145, 1986.

Downloads: (external link)
http://www.nber.org/papers/t0051.pdf (application/pdf)

Related works:
Journal Article: Do we reject too often?: Small sample properties of tests of rational expectations models (1986)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:nbr:nberte:0051

Ordering information: This working paper can be ordered from
http://www.nber.org/papers/t0051

Access Statistics for this paper

More papers in NBER Technical Working Papers from National Bureau of Economic Research, Inc National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.. Contact information at EDIRC.
Bibliographic data for series maintained by ().