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Inference on winners

Authors: Isaiah Andrews , Toru Kitagawa and Adam McCloskey
Date: 31 December 2018
Type: cemmap Working Paper, CWP73/18

Abstract

Many empirical questions can be cast as inference on a parameter selected through optimization. For example, researchers may be interested in the effectiveness of the best policy found in a randomized trial, or the best-performing investment strategy based on historical data. Such settings give rise to a winner’s curse, where conventional estimates are biased and conventional confidence intervals are unreliable. This paper develops optimal confidence sets and median-unbiased estimators that are valid conditional on the parameter selected and so overcome this winner’s curse. If one requires validity only on average over target parameters that might have been selected, we develop hybrid procedures that combine conditional and projection confidence sets to offer further performance gains relative to existing alternatives.

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Isaiah Andrews, Toru Kitagawa and Adam McCloskey May 2018, Inference on winners, cemmap Working Paper, CWP31/18, The IFS

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