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on Econometrics |
| By: | Niels Haldrup (Aarhus University and CREATES); Antonio Montañés (University of Zaragoza); Andreu Sansó (University of The Balearic Islands) |
| Abstract: | The detection and location of additive outliers in integrated variables has attracted much attention recently because such outliers tend to affect unit root inference among other things. Most of these procedures have been developed for non-seasonal processes. However, the presence of seasonality in the form of seasonally varying means and variances affect the properties of outlier detection procedures, and hence appropriate adjustments of existing methods are needed for seasonal data. In this paper we suggest modifications of tests proposed by Shin et al. (1996) and Perron and Rodriguez (2003) to deal with data sampled at a seasonal frequency and the size and power properties are discussed. We also show that the presence of periodic heteroscedasticity will inflate the size of the tests and hence will tend to identify an excessive number of outliers. A modified Perron-Rodriguez test which allows periodically varying variances is suggested and it is shown to have excellent properties in terms of both power and size |
| Keywords: | Additive outliers, outlier detection, integrated processes, periodic heteroscedasticity, seasonality |
| JEL: | C12 C2 C22 |
| Date: | 2009–09–14 |
| URL: | http://d.repec.org/n?u=RePEc:aah:create:2009-40&r=ecm |
| By: | Joseph P. Romano; Azeem M. Shaikh; Michael Wolf |
| Abstract: | This paper reviews important concepts and methods that are useful for hypothesis testing. First, we discuss the Neyman-Pearson framework. Various approaches to optimality are presented, including finite-sample and large-sample optimality. Then, some of the most important methods are summarized, as well as resampling methodology which is useful to set critical values. Finally, we consider the problem of multiple testing, which has witnessed a burgeoning literature in recent years. Along the way, we incorporate some examples that are current in the econometrics literature. While we include many problems with wellknown successful solutions, we also include open problems that are not easily handled with current technology, stemming from issues like lack of optimality or poor asymptotic approximations. |
| Keywords: | Asymptotics, multiple testing, optimality, resampling |
| JEL: | C12 |
| Date: | 2009–09 |
| URL: | http://d.repec.org/n?u=RePEc:zur:iewwpx:444&r=ecm |
| By: | Joseph P. Romano; Azeem M. Shaikh; Michael Wolf |
| Abstract: | Consider the problem of testing s hypotheses simultaneously. In order to deal with the multiplicity problem, the classical approach is to restrict attention to procedures that control the familywise error rate (FWE). Typically, it is known how to construct tests of the individual hypotheses, and the problem is how to combine them into a multiple testing procedure that controls the FWE. The closure method of Marcus et al. (1976), in fact, reduces the problem of constructing multiple test procedures which control the FWE to the construction of single tests which control the usual probability of a Type 1 error. The purpose of this paper is to examine the closure method with emphasis on the concepts of coherence and consonance. It was shown by Sonnemann and Finner (1988) that any incoherent procedure can be replaced by a coherent one which is at least as good. The main point of this paper is to show a similar result for dissonant and consonant procedures. We illustrate the idea of how a dissonant procedure can be strictly improved by a consonant procedure in the sense of increasing the probability of detecting a false null hypothesis while maintaining control of the FWE. We then show how consonance can be used in the construction of some optimal maximin procedures. |
| Keywords: | Multiple testing, closure method, coherence, consonance, familywise error rate |
| JEL: | C12 C14 |
| Date: | 2009–09 |
| URL: | http://d.repec.org/n?u=RePEc:zur:iewwpx:446&r=ecm |
| By: | John Galbraith; Douglas James Hodgson |
| Abstract: | In hedonic regression models of the valuation of works of art, the age at which an artist produces a particular work, or an indicator variable for periods in his or her artistic career, is often found to have highly significant predictive value. Most existing results are based on regressions that pool large groups of painters. Although it is of interest to estimate such regressions for individual artists, the sample sizes are often inadequate for a model that would also include the large number of other relevant variables. We address this problem of inadequate degrees of freedom in individual artist regressions by using two statistical methods (model averaging and dimension reduction) to incorporate information from a potentially large number of predictor variables, allowing us to work with relatively small samples. We find that individual age-valuation profiles can differ substantially from general pooled profiles, suggesting that methods that are more responsive to the unique features of individual artists may provide better predictions of art valuations at auction. <P>In hedonic regression models of the valuation of works of art, the age at which an artist produces a particular work, or an indicator variable for periods in his or her artistic career, is often found to have highly significant predictive value. Most existing results are based on regressions that pool large groups of painters. Although it is of interest to estimate such regressions for individual artists, the sample sizes are often inadequate for a model that would also include the large number of other relevant variables. We address this problem of inadequate degrees of freedom in individual artist regressions by using two statistical methods (model averaging and dimension reduction) to incorporate information from a potentially large number of predictor variables, allowing us to work with relatively small samples. We find that individual age-valuation profiles can differ substantially from general pooled profiles, suggesting that methods that are more responsive to the unique features of individual artists may provide better predictions of art valuations at auction. |
| Keywords: | Dimension reduction, factor-augmented model, model averaging, réduction de dimension, modèle de facteur augmenté, moyenne de modèles |
| Date: | 2009–09–01 |
| URL: | http://d.repec.org/n?u=RePEc:cir:cirwor:2009s-41&r=ecm |
| By: | Mardi Dungey; Abdullah Yalama |
| Abstract: | We examine whether contagion tests are affected by controls for volatility clustering and the collection of synchronized data sets. Without controlling for volatility clustering synchronization does not apparently matter. Once volatility clustering is accounted for synchronized data dramatically changes results. |
| JEL: | C23 |
| Date: | 2009–09 |
| URL: | http://d.repec.org/n?u=RePEc:acb:camaaa:2009-23&r=ecm |
| By: | Kühl Teles, Vladimir; Denadai, Ricardo |
| Abstract: | The article suggests a new test for strong hysteresis in international trade. The variables that capture the effects of hysteresis are based on the model of Dixit (1989) with calibrations using a state-space model to determine the parameters for each point in time. These variables are then applied to a cointegration test with breaks, where it is possible to verify whether the hysteresis effect is essential in determining the long-term equilibrium. |
| Date: | 2009–08–26 |
| URL: | http://d.repec.org/n?u=RePEc:fgv:eesptd:195&r=ecm |
| By: | Michael Wolf; Dan Wunderli |
| Abstract: | Fund-of-funds (FoF) managers face the task of selecting a (relatively) small number of hedge funds from a large universe of candidate funds. We analyse whether such a selection can be successfully achieved by looking at the track records of the available funds alone, using advanced statistical techniques. In particular, at a given point in time, we determine which funds significantly outperform a given benchmark while, crucially, accouting for the fact that a large number of funds are examined at the same time. This is achieved by employing so-called multiple testing methods. Then, the equal-weighted or the global minimum variance portfolio of the outperforming funds is held for one year, after which the selection process is repeated. When backtesting this strategy on two particular hedge fund universes, we find that the resulting FoF portfolios have attractive return properties compared to the 1/N portfolio (that is, simply equal-weighting all the available funds) but also when compared to two investable hedge fund indices. |
| Keywords: | Bootstrap, familywise error rate, fund-of-funds, performance evaluation |
| JEL: | C12 C14 C22 G11 |
| Date: | 2009–09 |
| URL: | http://d.repec.org/n?u=RePEc:zur:iewwpx:445&r=ecm |