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Approaches for the Joint Evaluation of Hypothesis Tests: Classical Testing, Bayes Testing, and Joint Confirmation

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  • Kunst, Robert M.

    (Department of Economics and Finance, Institute for Advanced Studies, Vienna, Austria and Department of Economics, University of Vienna)

Abstract

The occurrence of decision problems with changing roles of null and alternative hypotheses has increased interest in extending the classical hypothesis testing setup. Particularly, confirmation analysis has been in the focus of some recent contributions in econometrics. We emphasize that confirmation analysis is grounded in classical testing and should be contrasted with the Bayesian approach. Differences across the three approaches – traditional classical testing, Bayes testing, joint confirmation – are highlighted for a popular testing problem. A decision is searched for the existence of a unit root in a time-series process on the basis of two tests. One of them has the existence of a unit root as its null hypothesis and its non-existence as its alternative, while the roles of null and alternative are reversed for the other hypothesis test.

Suggested Citation

  • Kunst, Robert M., 2005. "Approaches for the Joint Evaluation of Hypothesis Tests: Classical Testing, Bayes Testing, and Joint Confirmation," Economics Series 177, Institute for Advanced Studies.
    • Handle: RePEc:ihs:ihsesp:177
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    File URL: https://irihs.ihs.ac.at/id/eprint/1652
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    Confirmation analysis; Decision contours; Unit roots;
    All these keywords.

    JEL classification:

    • C11 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Bayesian Analysis: General
    • C12 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Hypothesis Testing: General
    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • C44 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Operations Research; Statistical Decision Theory

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