Next Article in Journal
Pitfalls of Two-Step Testing for Changes in the Error Variance and Coefficients of a Linear Regression Model
Next Article in Special Issue
On Using the t-Ratio as a Diagnostic
Previous Article in Journal
Background Indicators
Previous Article in Special Issue
Important Issues in Statistical Testing and Recommended Improvements in Accounting Research
Open AccessArticle

Interval-Based Hypothesis Testing and Its Applications to Economics and Finance

1
Department of Economics and Finance, La Trobe University, Bundoora, VIC 3086, Australia
2
School of Mathematics and Statistics, University of Melbourne, Parkville, VIC 3010, Australia
*
Author to whom correspondence should be addressed.
Econometrics 2019, 7(2), 21; https://doi.org/10.3390/econometrics7020021
Received: 26 March 2019 / Revised: 6 May 2019 / Accepted: 7 May 2019 / Published: 15 May 2019
(This article belongs to the Special Issue Towards a New Paradigm for Statistical Evidence)
This paper presents a brief review of interval-based hypothesis testing, widely used in bio-statistics, medical science, and psychology, namely, tests for minimum-effect, equivalence, and non-inferiority. We present the methods in the contexts of a one-sample t-test and a test for linear restrictions in a regression. We present applications in testing for market efficiency, validity of asset-pricing models, and persistence of economic time series. We argue that, from the point of view of economics and finance, interval-based hypothesis testing provides more sensible inferential outcomes than those based on point-null hypothesis. We propose that interval-based tests be routinely employed in empirical research in business, as an alternative to point null hypothesis testing, especially in the new era of big data. View Full-Text
Keywords: equivalence; minimum-effect; non-inferiority; point-null hypothesis testing; zero probability paradox equivalence; minimum-effect; non-inferiority; point-null hypothesis testing; zero probability paradox
Show Figures

Figure 1

MDPI and ACS Style

Kim, J.H.; Robinson, A.P. Interval-Based Hypothesis Testing and Its Applications to Economics and Finance. Econometrics 2019, 7, 21. https://doi.org/10.3390/econometrics7020021

AMA Style

Kim JH, Robinson AP. Interval-Based Hypothesis Testing and Its Applications to Economics and Finance. Econometrics. 2019; 7(2):21. https://doi.org/10.3390/econometrics7020021

Chicago/Turabian Style

Kim, Jae H.; Robinson, Andrew P. 2019. "Interval-Based Hypothesis Testing and Its Applications to Economics and Finance" Econometrics 7, no. 2: 21. https://doi.org/10.3390/econometrics7020021

Find Other Styles
Note that from the first issue of 2016, MDPI journals use article numbers instead of page numbers. See further details here.

Article Access Map by Country/Region

1
Search more from Scilit
 
Search
Back to TopTop