IDEAS home Printed from https://ideas.repec.org/p/hal/wpaper/hal-00686220.html
   My bibliography  Save this paper

Improved Small Sample Inference for Efficient Method of Moments and Indirect Inference Estimators

Author

Listed:
  • Veronika Czellar

    (GREGH - Groupement de Recherche et d'Etudes en Gestion à HEC - HEC Paris - Ecole des Hautes Etudes Commerciales - CNRS - Centre National de la Recherche Scientifique)

  • Eric Zivot

    (Department of Economics - University of Washington [Seattle])

Abstract

The efficient method of moments (EMM) and indirect inference (II) are two widely used simulation-based techniques for estimating structural models that have intractable likelihood functions. The poor performance in finite samples of traditional coefficient and overidentification tests based on the EMM or II objective function indicates a failure of first order asymptotic theory for the distribution of these tests, especially for EMM. We propose practically feasible saddlepoint coefficcient tests for hypotheses on structural coefficients estimated by II and EMM that are asymptotically chi-square distributed and have much better finite sample performance than traditional tests. To construct the tests, we make use of the fact that II and EMM estimators have asymptotically equivalent M-estimators and then use the coefficient saddlepoint tests for M-estimators developed by Robinson, Ronchetti and Young (2003). We evaluate the nite sample behavior of our coeffucient saddlepoint tests by Monte Carlo methods using a MA(1) model. Whereas traditional likelihood-ratio type tests can exhibit substantial size distortions,we show that our saddlepoint tests do not. We also find that the size-adjusted power of our saddlepoint tests is similar to and sometimes greater than the power of traditional tests.

Suggested Citation

  • Veronika Czellar & Eric Zivot, 2012. "Improved Small Sample Inference for Efficient Method of Moments and Indirect Inference Estimators," Working Papers hal-00686220, HAL.
    • Handle: RePEc:hal:wpaper:hal-00686220
    as

    Download full text from publisher

    To our knowledge, this item is not available for download. To find whether it is available, there are three options:
    1. Check below whether another version of this item is available online.
    2. Check on the provider's web page whether it is in fact available.
    3. Perform a search for a similarly titled item that would be available.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:hal:wpaper:hal-00686220. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: CCSD (email available below). General contact details of provider: https://hal.archives-ouvertes.fr/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.