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Robust Empirical Bayes Confidence Intervals

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arxiv 2004.03448 v4 pith:OH6AIAF5 submitted 2020-04-07 econ.EM stat.ME

Robust Empirical Bayes Confidence Intervals

classification econ.EM stat.ME
keywords ebcismeansempiricalbayescoverageintervalsaverageconfidence
verification ladder T0 review T1 audit T2 compute T3 formal T4 reserved
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We construct robust empirical Bayes confidence intervals (EBCIs) in a normal means problem. The intervals are centered at the usual linear empirical Bayes estimator, but use a critical value accounting for shrinkage. Parametric EBCIs that assume a normal distribution for the means (Morris, 1983b) may substantially undercover when this assumption is violated. In contrast, our EBCIs control coverage regardless of the means distribution, while remaining close in length to the parametric EBCIs when the means are indeed Gaussian. If the means are treated as fixed, our EBCIs have an average coverage guarantee: the coverage probability is at least $1 - \alpha$ on average across the $n$ EBCIs for each of the means. Our empirical application considers the effects of U.S. neighborhoods on intergenerational mobility.

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