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Title:Testing multiple inequality hypotheses: A smoothed indicator approach PDF Logo
Authors:Chen, Le-Yu
Szroeter, Jerzy
Issue Date:2012
Series/Report no.:cemmap working paper CWP16/12
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 signficance 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.
Subjects:Test
Multiple inequalities
One-sided hypothesis
Composite null
Binding constraints
Asymptotic exactness
Covariance singularity
Indicator smoothing
JEL:C1
C4
Persistent Identifier of the first edition:doi:10.1920/wp.cem.2012.1612
Document Type:Working Paper
Appears in Collections:cemmap working papers, Centre for Microdata Methods and Practice, Institute for Fiscal Studies (IFS)

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