Arbeitspapier
Inference on sets in finance
In this paper 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, among others, the Hansen-Jagannathan (HJ) sets of admissible stochastic discount factors, Markowitz-Fama (MF) sets of meanvariances for asset portfolio returns, and the set of structural elasticities in Chetty (2012)'s analysis of demand with optimization frictions. We show that the econometric structure of the problem allows us to construct convenient and powerful confidence regions based upon the weighted likelihood ratio and weighted Wald (directed weighted Hausdorff) statistics. The statistics we formulate differ (in part) 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. Moreover, the resulting inference procedures are also more powerful than the structured projection methods, which rely upon building confidence sets for the frontier-determining sufficient parameters (e.g. frontier-spanning portfolios), and then projecting them to obtain confidence sets for HJ sets or MF sets. Lastly, the framework we put forward 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 that show how the new econometric methods are able to generate sharp economic conclusions.
- Language
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Englisch
- Bibliographic citation
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Series: cemmap working paper ; No. CWP46/12
- Classification
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Wirtschaft
Econometric and Statistical Methods and Methodology: General
Econometric Modeling: General
- Subject
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Hansen-Jagannathan bound
Markowitz-Fama bounds
Chetty bounds
Mean-Variance sets
Optimization Frictions
Inference
Confidence Set
- Event
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Geistige Schöpfung
- (who)
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Chernozhukov, Victor
Kocatulum, Emre
Menzel, Konrad
- Event
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Veröffentlichung
- (who)
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Centre for Microdata Methods and Practice (cemmap)
- (where)
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London
- (when)
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2012
- DOI
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doi:10.1920/wp.cem.2012.4612
- Handle
- Last update
-
10.03.2025, 11:44 AM CET
Data provider
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. If you have any questions about the object, please contact the data provider.
Object type
- Arbeitspapier
Associated
- Chernozhukov, Victor
- Kocatulum, Emre
- Menzel, Konrad
- Centre for Microdata Methods and Practice (cemmap)
Time of origin
- 2012
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Inference on counterfactual distributions
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Simultaneous inference for best linear predictor of the conditional average treatment effect and other structural functions
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