Fiche du document
7 juin 2020
- 2006.04269
Sujets proches
Mistakes Economic theory Political economyCiter ce document
Campbell R. Harvey et al., « False (and Missed) Discoveries in Financial Economics », arXiv - économie
Partage / Export
Résumé
Multiple testing plagues many important questions in finance such as fund and factor selection. We propose a new way to calibrate both Type I and Type II errors. Next, using a double-bootstrap method, we establish a t-statistic hurdle that is associated with a specific false discovery rate (e.g., 5%). We also establish a hurdle that is associated with a certain acceptable ratio of misses to false discoveries (Type II error scaled by Type I error), which effectively allows for differential costs of the two types of mistakes. Evaluating current methods, we find that they lack power to detect outperforming managers.