Bimodal t-ratios: The impact of thick tails on inference

• Main Authors: FIORO, Carlo V., HAJIVASSILIOU, Vassilis A., Peter C. B. PHILLIPS
• Format: text
• Language: English
• Published: Institutional Knowledge at Singapore Management University 2010
• Subjects: Bimodality; Cauchy; Double-pareto; Thick tails; T- ratio; Econometrics
• Online Access: https://ink.library.smu.edu.sg/soe_research/1817; https://ink.library.smu.edu.sg/context/soe_research/article/2816/viewcontent/bimodal_t_ratio_av.pdf
• Institution: Singapore Management University

This paper studies the distribution of the classical t-ratio with data generated from distributions with no finite moments and shows how classical testing is affected by bimodality. A key condition in generating bimodality is independence of the observations in the underlying data-generating process...