Inference on functionals under first order degeneracy

Asymptotic properties of nonparametric inference (62G20) Applications of statistics to economics (62P20) Nonparametric statistical resampling methods (62G09)

Abstract: This paper presents a unified second order asymptotic framework for conducting inference on parameters of the form

p h i (h e t a_{0})

, where

h e t a_{0}

is unknown but can be estimated by

h a t h e t a_{n}

, and

p h i

is a known map that admits null first order derivative at

h e t a_{0}

. For a large number of examples in the literature, the second order Delta method reveals a nondegenerate weak limit for the plug-in estimator

p h i (h a t h e t a_{n})

. We show, however, that the `standard' bootstrap is consistent if and only if the second order derivative

p h i_{h^{″} e t a_{0}} = 0

under regularity conditions, i.e., the standard bootstrap is inconsistent if

p h i_{h^{″} e t a_{0}} e q 0

, and provides degenerate limits unhelpful for inference otherwise. We thus identify a source of bootstrap failures distinct from that in Fang and Santos (2018) because the problem (of consistently bootstrapping a extit{nondegenerate} limit) persists even if

p h i

is differentiable. We show that the correction procedure in Babu (1984) can be extended to our general setup. Alternatively, a modified bootstrap is proposed when the map is extit{in addition} second order nondifferentiable. Both are shown to provide local size control under some conditions. As an illustration, we develop a test of common conditional heteroskedastic (CH) features, a setting with both degeneracy and nondifferentiability -- the latter is because the Jacobian matrix is degenerate at zero and we allow the existence of multiple common CH features.

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