Robust control and model misspecification

نویسندگان

  • Lars Peter Hansen
  • Thomas J. Sargent
  • Gauhar Turmuhambetova
  • Noah Williams
چکیده

A decision maker fears that data are generated by a statistical perturbation of an approximating model that is either a controlled diffusion or a controlled measure over continuous functions of time. A perturbation is constrained in terms of its relative entropy. Several different two-player zero-sum games that yield robust decision rules and are related to one another, to the max-min expected utility theory of Gilboa and Schmeidler (1989), and to the recursive risk-sensitivity criterion described in discrete time by Hansen and Sargent (1995). To represent perturbed models, we use martingales on the probability space associated with the approximating model. Alternative sequential and non-sequential versions of robust control theory imply identical robust decision rules that are dynamically consistent in a useful sense.

برای دانلود رایگان متن کامل این مقاله و بیش از 32 میلیون مقاله دیگر ابتدا ثبت نام کنید

ثبت نام

اگر عضو سایت هستید لطفا وارد حساب کاربری خود شوید

منابع مشابه

A Quartet of Semigroups for Model Specification, Robustness, Prices of Risk, and Model Detection

A representative agent fears that his model, a continuous time Markov process with jump and diffusion components, is misspecified and therefore uses robust control theory to make decisions. Under the decision maker’s approximating model, that cautious behavior puts adjustments for model misspecification into market prices for risk factors. We use a statistical theory of detection to quantify ho...

متن کامل

How Robust Standard Errors Expose Methodological Problems They Do Not Fix, and What to Do About It

“Robust standard errors” are used in a vast array of scholarship to correct standard errors for model misspecification. However, when misspecification is bad enough to make classical and robust standard errors diverge, assuming that it is nevertheless not so bad as to bias everything else requires considerable optimism. And even if the optimism is warranted, settling for a misspecified model, w...

متن کامل

Asymptotic Refinements of a Misspecification-Robust Bootstrap for Generalized Method of Moments Estimators

I propose a nonparametric iid bootstrap that achieves asymptotic refinements for t tests and confidence intervals based on the generalized method of moments (GMM) estimators even when the model is misspecified. In addition, my bootstrap does not require recentering the bootstrap moment function, which has been considered as a critical procedure for bootstrapping GMM. The elimination of the rece...

متن کامل

Ambiguity aversion and an intertemporal equilibrium model of catastrophe-linked securities pricing

To explain several stylized facts concerning catastrophe-linked securities premium spread, we propose an intertemporal equilibrium model by allowing agents to act in a robust control framework against model misspecification with respect to rare events. We have presented closed-form pricing formulas in some special cases and tested the model using empirical data and simulation. © 2011 Elsevier B...

متن کامل

Acknowledging Misspecification in Macroeconomic Theory

We explore methods for confronting model misspecification in macroeconomics. We construct dynamic equilibria in which private agents and policy makers recognize that models are approximations. We explore two generalizations of rational expectations equilibria. In one of these equilibria, decision makers use dynamic evolution equations that are imperfect statistical approximations, and in the ot...

متن کامل

The effect of massage and shaking on infants with colic in a clinical trial concerning the misspecification

Background: Statistical models are used to investigate the relationship between variables in statistical studies. Considering the variety of statistical models, finding the most suitable model is a complex work. This study aimed to compare different models in the treatment of infants' colic and the misspecification of specificity. Methods: This randomized clinical trial was conducted on 100 in...

متن کامل

ذخیره در منابع من


  با ذخیره ی این منبع در منابع من، دسترسی به آن را برای استفاده های بعدی آسان تر کنید

عنوان ژورنال:
  • J. Economic Theory

دوره 128  شماره 

صفحات  -

تاریخ انتشار 2006