Gagliardini, Patrick; Trojani, Fabio; Urga, Giovanni - Institut für Schweizerisches Bankwesen <Zürich>; … - 2003
asymptotic bias of size and power under local model misspecifications. We illustrate the trade-o. between robustness and e … highly unstable under local model misspecifications. In particular, the loss in power can be very substantial in some models …. Robust testing procedures yield important power improvements under a misspecified model while under an exact reference model …