Reusing Natural Experiments

56 Pages Posted: 21 Sep 2019

See all articles by Davidson Heath

Davidson Heath

University of Utah David Eccles School of Business

Matthew Ringgenberg

University of Utah - Department of Finance

Mehrdad Samadi

Southern Methodist University (SMU) - Finance Department

Ingrid M. Werner

The Ohio State University - Fisher College of Business

Date Written: September 20, 2019

Abstract

Natural experiments are used in empirical research to make causal inferences. After a natural experiment is first used, other researchers often reuse the setting, examining different outcomes based on causal chain arguments. Using simulation evidence combined with two extensively studied natural experiments, business combination laws and the Regulation SHO pilot, we show that the repeated use of a natural experiment significantly increases the likelihood of false discoveries. To correct this, we propose multiple testing methods which account for dependence across tests and we show evidence of their efficacy.

Keywords: False Positive, Identification, Multiple Hypothesis Testing, Natural Experiments

JEL Classification: G1, G10

Suggested Citation

Heath, Davidson and Ringgenberg, Matthew C. and Samadi, Mehrdad and Werner, Ingrid M., Reusing Natural Experiments (September 20, 2019). Fisher College of Business Working Paper No. 2019-03-021; SMU Cox School of Business Research Paper . Available at SSRN: https://ssrn.com/abstract=3457525 or http://dx.doi.org/10.2139/ssrn.3457525

Davidson Heath

University of Utah David Eccles School of Business ( email )

Salt Lake City, UT 84112
United States

Matthew C. Ringgenberg

University of Utah - Department of Finance ( email )

David Eccles School of Business
Salt Lake City, UT 84112
United States

Mehrdad Samadi

Southern Methodist University (SMU) - Finance Department ( email )

United States

Ingrid M. Werner (Contact Author)

The Ohio State University - Fisher College of Business ( email )

2100 Neil Avenue
Columbus, OH 43210-1144
United States
614-292-6460 (Phone)
614-292-2418 (Fax)

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