Confi dence Set for Group Membership

Economics

Speaker:Ryo Okui, NYU Shanghai
Website: https://sites.google.com/site/okuiryoeconomics/
Date: Friday 9 November 2018
Time: 14.00
Location: Matrix Lecture Theatre, Building One

Further details

We develop new procedures to quantify the statistical uncertainty from sorting units in panel data into groups using data-driven clustering algorithms. In our setting, each unit belongs to one of a fi nite number of latent groups and its regression curve is determined by which group it belongs to. Our main contribution is a new joint confi dence set for group membership. Each element of the joint con fidence set is a vector of possible group assignments for all units. The vector of true group memberships is contained in the con fidence set with a pre-specifi ed probability. The confi dence set inverts a test for group membership. This test exploits a characterization of the true group memberships by a system of moment inequalities. Our procedure solves a high-dimensional one-sided testing problem and tests group membership simultaneously for all units. We also propose a procedure for identifying units for which group membership is obviously determined. These units can be ignored when computing critical values. We justify the joint confi dence set under N,T ** asymptotics where we allow T to be much smaller than N. Our arguments rely on the theory of self-normalized sums and high-dimensional central limit theorems. We contribute new theoretical results for testing problems with a large number of moment inequalities, including an anti-concentration inequality for the quasi-likelihood ratio (QLR) statistic. Monte Carlo results indicate that our con fidence set has adequate coverage and is informative. We illustrate the practical relevance of our confi dence set in two applications.