SMU SOE Online Seminar (Mar 4, 2021, 4pm-5.30pm): Cheating with Models

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ABSTRACT Beliefs and decisions are often based on confronting models with data. What is the largest “fake” correlation that a misspecified model can generate, even when it passes an elementary misspecification test? We study an “analyst” who fits a model, represented by a directed acyclic graph, to an objective (multivariate) Gaussian distribution. We characterize the maximal estimated pairwise correlation for generic Gaussian objective distributions, subject to the constraint that the estimated model preserves the marginal distribution of any individual variable. As the number of model variables grows, the estimated correlation can become arbitrarily close to one, regardless of the objective correlation. Click here to view the CV.		This seminar will be held virtually via Zoom. A confirmation email with the Zoom details will be sent to the registered email by 3 March 2021.
		PRESENTER Rani Spiegler Tel Aviv University University College London
		RESEARCH FIELD Microeconomic Theory
		DATE: 4 March 2021 (Thursday)
		TIME: 4.00pm - 5.30pm