Strategies for comparison of alternative tests do not receive much attention in econometrics. The purpose of this paper is to introduce the concept of stringency and illustrate it in the context of a very simple hypothesis testing problem. Systematic use of this concept can be very helpful in evaluating relative performance of tests.
Keywords: Power Envelope, Location Parameter, Stringent Test.
JEL Classifications: C12.
DOI #: 10.33818/ier.319909
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1 Arif Zaman, Professor of Statistics and Mathematics, Lahore University of Management Science, Lahore, (email: arifz@lums.edu.pk).
2 Asad Zaman,Vice Chancellor, Pakistan Institute of Development Economics, Islamabad, (email: asadzaman@alum.mit.edu), Tel: +92-51-9248042, Fax: +92-51-9248025.
3 Atiq-ur Rehman, Assistant Professor, Department of Econometrics and Statistics, Pakistan Institute of Development Economics, Islamabad, (email: atiq@pide.org.pk) Phone +92-51-9248060, Fax: +92-51-9248025.