On the Hauck-Donner Effect in Wald Tests: Detection, Tipping Points, and Parameter Space Characterization (2001.08431v2)

Abstract: The Wald test remains ubiquitous in statistical practice despite shortcomings such as its inaccuracy in small samples and lack of invariance under reparameterization. This paper develops on another but lesser-known shortcoming called the Hauck--Donner effect (HDE) whereby a Wald test statistic is not monotonely increasing as a function of increasing distance between the parameter estimate and the null value. Resulting in an upward biased $p$-value and loss of power, the aberration can lead to very damaging consequences such as in variable selection. The HDE afflicts many types of regression models and corresponds to estimates near the boundary of the parameter space. This article presents several new results, and its main contributions are to (i) propose a very general test for detecting the HDE, regardless of its underlying cause; (ii) fundamentally characterize the HDE by pairwise ratios of Wald and Rao score and likelihood ratio test statistics for 1-parameter distributions; (iii) show that the parameter space may be partitioned into an interior encased by 5 HDE severity measures (faint, weak, moderate, strong, extreme); (iv) prove that a necessary condition for the HDE in a 2 by 2 table is a log odds ratio of at least 2; (v) give some practical guidelines about HDE-free hypothesis testing. Overall, practical post-fit tests can now be conducted potentially to any model estimated by iteratively reweighted least squares, such as the generalized linear model (GLM) and Vector GLM (VGLM) classes, the latter which encompasses many popular regression models.