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|Abstract:||This paper considers nonstandard hypothesis testing problems that involve a nuisance parameter. We establish an upper bound on the weighted average power of all valid tests, and develop a numerical algorithm that determines a feasible test with power close to the bound. The approach is illustrated in six applications: inference about a linear regression coefficient when the sign of a control coefficient is known; small sample inference about the difference in means from two independent Gaussian samples from populations with potentially different variances; inference about the break date in structural break models with moderate break magnitude; predictability tests when the regressor is highly persistent; inference about an interval identified parameter; and inference about a linear regression coefficient when the necessity of a control is in doubt|
|Citation:||Elliott, Graham, Müller, Ulrich K, Watson, Mark W. (2015). Nearly Optimal Tests When a Nuisance Parameter Is Present Under the Null Hypothesis. Econometrica, 83 (2), 771 - 811. doi:10.3982/ECTA10535|
|Pages:||771 - 811|
|Type of Material:||Journal Article|
|Version:||Final published version. Article is made available in OAR by the publisher's permission or policy.|
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