Robustness Checks in Structural Analysis

55 Pages Posted: 22 Sep 2022 Last revised: 14 Feb 2023

See all articles by Sylvain Catherine

Sylvain Catherine

University of Pennsylvania - Finance Department

Mehran Ebrahimian

Stockholm School of Economics - Finance Department

David Alexandre Sraer

University of California, Berkeley; National Bureau of Economic Research (NBER); Centre for Economic Policy Research (CEPR)

David Thesmar

Massachusetts Institute of Technology (MIT) - Sloan School of Management; National Bureau of Economic Research (NBER); Centre for Economic Policy Research (CEPR)

Multiple version iconThere are 2 versions of this paper

Date Written: September 1, 2022

Abstract

Robustness checks are a standard feature of reduced-form empirical research. Because of computational costs of re-estimating alternative models, they are much less common in structural research using simulation-based methods. We propose a simple methodology to bypass this computational cost. Our approach is based on estimating a flexible approximation of the relation between moments and parameters. It provides a computationally cheap way to run the potentially large number of structural estimations required for such robustness checks. We demonstrate the validity and usefulness of this methodology in the context of two standard applications in economics and finance: (1) dynamic corporate finance (2) portfolio choice over the life cycle.

Keywords: structural estimation; robustness; computational methods

JEL Classification: G00; C52; C54

Suggested Citation

Catherine, Sylvain and Ebrahimian, Mehran and Sraer, David Alexandre and Thesmar, David, Robustness Checks in Structural Analysis (September 1, 2022). MIT Sloan Research Paper No. 6799-22, Jacobs Levy Equity Management Center for Quantitative Financial Research Paper, Available at SSRN: https://ssrn.com/abstract=4206149 or http://dx.doi.org/10.2139/ssrn.4206149

Sylvain Catherine

University of Pennsylvania - Finance Department ( email )

The Wharton School
3620 Locust Walk
Philadelphia, PA 19104
United States

Mehran Ebrahimian

Stockholm School of Economics - Finance Department ( email )

Sveavägen 65
Stockholm, 11383
Sweden

HOME PAGE: http://www.mehranebrahimian.com/

David Alexandre Sraer

University of California, Berkeley ( email )

310 Barrows Hall
Berkeley, CA 94720
United States

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

David Thesmar (Contact Author)

Massachusetts Institute of Technology (MIT) - Sloan School of Management ( email )

100 Main Street
Cambridge, MA 02142
United States

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

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