Why Has Econometric Inference Been Possible?

52 Pages Posted: 4 Aug 2015 Last revised: 17 Oct 2016

See all articles by Benjamin Holcblat

Benjamin Holcblat

University of Luxembourg

Steffen Gronneberg

BI Norwegian Business School - Department of Economics

Date Written: October 27, 2015

Abstract

In economics and finance, test statistics and confidence regions are typically probabilistically dependent on previously-used data. However, the Bayesian and classical justifications for usual tests and confidence regions are known to be invalid in this case. Given the success of empirical econometrics, this leads to the question: Why has econometric inference been possible? The paper provides a simple, yet general, answer to the question. We outline a novel econometric theory that i) is immune to conditioning on previously-used data, and that ii) nests model calibration, and most of econometric practices, whether they are labelled Bayesian or classical.

Keywords: Data mining; Specification search; Effect of model selection on inference; Hypothesis testing; Confidence region; Estimation; Model calibration; Classical inference; Bayesian inference; Empirical Bayes

JEL Classification: C1

Suggested Citation

Holcblat, Benjamin and Gronneberg, Steffen, Why Has Econometric Inference Been Possible? (October 27, 2015). Available at SSRN: https://ssrn.com/abstract=2639266 or http://dx.doi.org/10.2139/ssrn.2639266

Benjamin Holcblat (Contact Author)

University of Luxembourg ( email )

6 Rue Richard Coudenhove-Kalergi
Luxembourg, 1246
Luxembourg

Steffen Gronneberg

BI Norwegian Business School - Department of Economics ( email )

Nydalsveien 37
Oslo, 0484
Norway

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