Exact Testing of Many Moment Inequalities Against Multiple Violations

04/29/2019

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by   Nick Koning, et al.

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This paper considers the problem of testing many moment inequalities, where the number of moment inequalities (p) is possibly larger than the sample size (n). Chernozhukov et al. (2018) proposed asymptotic tests for this problem using the maximum t statistic. We observe that such tests can have low power if multiple inequalities are violated. As an alternative, we propose a novel randomization test based on a maximum non-negatively weighted combination of t statistics. Simulations show that the test controls size in small samples (n = 30, p = 1000), and often has substantially higher power against alternatives with multiple violations.