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Inference on sets in finance

Authors: Victor Chernozhukov , Emre Kocatulum and Konrad Menzel
Date: 05 February 2012
Type: cemmap Working Paper, CWP04/12
DOI: 10.1920/wp.cem.2012.0412


In this paper we introduce various set inference problems as they appear in finance and propose practical and powerful inferential tools. Our tools will be applicable to any problem where the set of interest solves a system of smooth estimable inequalities, though we will particularly focus on the following two problems: the admissible mean-variance sets of stochastic discount factors and the admissible mean-variance sets of asset portfolios. We propose to make inference on such sets using weighted likelihood-ratio and Wald type statistics, building upon and substantially enriching the available methods for inference on sets.

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Victor Chernozhukov, Emre Kocatulum and Konrad Menzel December 2012, Inference on sets in finance, cemmap Working Paper

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