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Power of Tests in Binary Response Models

N.E. Savin and Allan Würtz
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N.E. Savin: Univ. of Iowa

Econometrics from University Library of Munich, Germany

Abstract: Most hypotheses in binary response models are composite. The null hypothesis is usually that one or more slope coefficients are zero. Typically, the sequence of alternatives of interest is one in which the slope coefficients are increasing in absolute value. In this paper, we prove that the power goes to zero for this sequence of alternatives of interest in cases which often occur in practice. The practical implication is that for the sequence of alternatives of interest the power is nonmonotonic. This is true for any non-randomized test with size less than one and for a wide class of binary response models which includes the logit and probit models.

JEL-codes: C1 C5 C8 (search for similar items in EconPapers)
Pages: 14 pages
Date: 1996-06-17, Revised 1996-07-05
Note: Zipped using PKZIP v2.04, encoded using UUENCODE v5.15. Zipped file includes 1 file -- uiallan.wpa (PostScript 14 pages)
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Related works:
Journal Article: Power of Tests in Binary Response Models (1999)
Working Paper: Power of tests in Binary Response Models (1996)
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