Test statistics that are suitable for testing composite hypotheses are typically non-pivotal, and conservative bounds are commonly used to test composite hypotheses. In this paper, we propose a testing procedure for composite hypotheses that incorporates additional sample information. This...

This paper proposes a new test of the null hypothesis that a generalized method of moments model is identified. The test can detect local or global underidentification, and underidentification in some or all directions. The idea of the test is to compare the volume of two confidence sets - one...

This paper explores the sensitivity of plug-in based subset tests to instrument exclusion in linear IV regression. Recently, identification-robust statistics based on plug-in principle have been developed for testing hypotheses specified on subsets of the structural parameters. However, their...

A common stochastic restriction in econometric models separable in the latent variables is the assumption of stochastic independence between the unobserved and observed exogenous variables. Both simple and composite tests of this assumption are derived from properties of independence empirical...

The paper is a keynote lecture from the Tilburg-Madrid Conference on Hypothesis Tests: Foundations and Applications at the Universidad Nacional de Educación a Distancia (UNED) Madrid, Spain, 15-16 December 2011. It addresses the role of tests of statistical hypotheses (specification tests) in...

Hedging of illiquid financial instruments is carried out with liquid instruments that, as a rule, have simpler payoff functions. For example, hedging of Asian or long-dated put options is carried out with vanilla puts, hedging of Bermuda swaptions is done with vanilla swaptions, etc. This kind...

In recent years, the government, of African Countries has assumed major responsibilities for economic reforms and growth. In attempting to describe their economies, economists (policymakers) in many African Countries have applied certain models that are by now widely known: Linear programming...

Hedge Fund returns are often highly serially correlated mainly due to illiquidity exposures given that investments in such securities tend to be inactively traded and associated market prices are not always readily available. Following that, observed returns of such alternative investments tend...