CyberSec Research

This paper discusses identification, estimation, and inference on dynamic local average treatment effects (LATEs) in instrumental variables (IVs) settings. First, we show that compliers--observations whose treatment status is affected by the instrument--can be identified individually in time series data using smoothness assumptions and local comparisons of treatment assignments. Second, we show that this result enables not only better interpretability of IV estimates but also direct testing of the exclusion restriction by comparing outcomes among identified non-compliers across instrument values. Third, we document pervasive weak identification in applied work using IVs with time series data by surveying recent publications in leading economics journals. However, we find that strong identification often holds in large subsamples for which the instrument induces changes in the treatment. Motivated by this, we introduce a method based on dynamic programming to detect the most strongly-identified subsample and show how to use this subsample to improve estimation and inference. We also develop new identification-robust inference procedures that focus on the most strongly-identified subsample, offering efficiency gains relative to existing full sample identification-robust inference when identification fails over parts of the sample. Finally, we apply our results to heteroskedasticity-based identification of monetary policy effects. We find that about 75% of observations are compliers (i.e., cases where the variance of the policy shifts up on FOMC announcement days), and we fail to reject the exclusion restriction. Estimation using the most strongly-identified subsample helps reconcile conflicting IV and GMM estimates in the literature.

Many policy evaluations using instrumental variable (IV) methods include individuals who interact with each other, potentially violating the standard IV assumptions. This paper defines and partially identifies direct and spillover effects with a clear policy-relevant interpretation under relatively mild assumptions on interference. Our framework accommodates both spillovers from the instrument to treatment and from treatment to outcomes and allows for multiple peers. By generalizing monotone treatment response and selection assumptions, we derive informative bounds on policy-relevant effects without restricting the type or direction of interference. The results extend IV estimation to more realistic social contexts, informing program evaluation and treatment scaling when interference is present.

Enormous attention and resources are being devoted to the quest for artificial general intelligence and, even more ambitiously, artificial superintelligence. We wonder about the implications for our methodological research, which aims to help decision makers cope with what econometricians call identification problems, inferential problems in empirical research that do not diminish as sample size grows. Of particular concern are missing data problems in prediction and treatment choice. Essentially all data collection intended to inform decision making is subject to missing data, which gives rise to identification problems. Thus far, we see no indication that the current dominant architecture of machine learning (ML)-based artificial intelligence (AI) systems will outperform humans in this context. In this paper, we explain why we have reached this conclusion and why we see the missing data problem as a cautionary case study in the quest for superintelligence more generally. We first discuss the concept of intelligence, before presenting a decision-theoretic perspective that formalizes the connection between intelligence and identification problems. We next apply this perspective to two leading cases of missing data problems. Then we explain why we are skeptical that AI research is currently on a path toward machines doing better than humans at solving these identification problems.

Fairness and interpretability play an important role in the adoption of decision-making algorithms across many application domains. These requirements are intended to avoid undesirable group differences and to alleviate concerns related to transparency. This paper proposes a framework that integrates fairness and interpretability into algorithmic decision making by combining data transformation with policy trees, a class of interpretable policy functions. The approach is based on pre-processing the data to remove dependencies between sensitive attributes and decision-relevant features, followed by a tree-based optimization to obtain the policy. Since data pre-processing compromises interpretability, an additional transformation maps the parameters of the resulting tree back to the original feature space. This procedure enhances fairness by yielding policy allocations that are pairwise independent of sensitive attributes, without sacrificing interpretability. Using administrative data from Switzerland to analyze the allocation of unemployed individuals to active labor market programs (ALMP), the framework is shown to perform well in a realistic policy setting. Effects of integrating fairness and interpretability constraints are measured through the change in expected employment outcomes. The results indicate that, for this particular application, fairness can be substantially improved at relatively low cost.

Recursive decision trees have emerged as a leading methodology for heterogeneous causal treatment effect estimation and inference in experimental and observational settings. These procedures are fitted using the celebrated CART (Classification And Regression Tree) algorithm [Breiman et al., 1984], or custom variants thereof, and hence are believed to be "adaptive" to high-dimensional data, sparsity, or other specific features of the underlying data generating process. Athey and Imbens [2016] proposed several "honest" causal decision tree estimators, which have become the standard in both academia and industry. We study their estimators, and variants thereof, and establish lower bounds on their estimation error. We demonstrate that these popular heterogeneous treatment effect estimators cannot achieve a polynomial-in-$n$ convergence rate under basic conditions, where $n$ denotes the sample size. Contrary to common belief, honesty does not resolve these limitations and at best delivers negligible logarithmic improvements in sample size or dimension. As a result, these commonly used estimators can exhibit poor performance in practice, and even be inconsistent in some settings. Our theoretical insights are empirically validated through simulations.

For premium consumer products, pricing strategy is not about a single number, but about understanding the perceived monetary value of the features that justify a higher cost. This paper proposes a robust methodology to deconstruct a product's price into the tangible value of its constituent parts. We employ Bayesian Hierarchical Conjoint Analysis, a sophisticated statistical technique, to solve this high-stakes business problem using the Apple iPhone as a universally recognizable case study. We first simulate a realistic choice based conjoint survey where consumers choose between different hypothetical iPhone configurations. We then develop a Bayesian Hierarchical Logit Model to infer consumer preferences from this choice data. The core innovation of our model is its ability to directly estimate the Willingness-to-Pay (WTP) in dollars for specific feature upgrades, such as a "Pro" camera system or increased storage. Our results demonstrate that the model successfully recovers the true, underlying feature valuations from noisy data, providing not just a point estimate but a full posterior probability distribution for the dollar value of each feature. This work provides a powerful, practical framework for data-driven product design and pricing strategy, enabling businesses to make more intelligent decisions about which features to build and how to price them.

This paper studies high-dimensional curve time series with common stochastic trends. A dual functional factor model structure is adopted with a high-dimensional factor model for the observed curve time series and a low-dimensional factor model for the latent curves with common trends. A functional PCA technique is applied to estimate the common stochastic trends and functional factor loadings. Under some regularity conditions we derive the mean square convergence and limit distribution theory for the developed estimates, allowing the dimension and sample size to jointly diverge to infinity. We propose an easy-to-implement criterion to consistently select the number of common stochastic trends and further discuss model estimation when the nonstationary factors are cointegrated. Extensive Monte-Carlo simulations and two empirical applications to large-scale temperature curves in Australia and log-price curves of S&P 500 stocks are conducted, showing finite-sample performance and providing practical implementations of the new methodology.

In this paper, using the Bayesian VAR framework suggested by Chan et al. (2025), we produce conditional temperature forecasts up until 2050, by exploiting both equality and inequality constraints on climate drivers like carbon dioxide or methane emissions. Engaging in a counterfactual scenario analysis by imposing a Shared Socioeconomic Pathways (SSPs) scenario of "business as-usual", with no mitigation and high emissions, we observe that conditional and unconditional forecasts would follow a similar path. Instead, if a high mitigation with low emissions scenario were to be followed, the conditional temperature paths would remain below the unconditional trajectory after 2040, i.e. temperatures increases can potentially slow down in a meaningful way, but the lags for changes in emissions to have an effect are quite substantial. The latter should be taken into account greatly when designing response policies to climate change.

This paper studies a functional regression model with nonstationary dependent and explanatory functional observations, in which the nonstationary stochastic trends of the dependent variable are explained by those of the explanatory variable, and the functional observations may be error-contaminated. We develop novel autocovariance-based estimation and inference methods for this model. The methodology is broadly applicable to economic and statistical functional time series with nonstationary dynamics. To illustrate our methodology and its usefulness, we apply it to the evaluation of the global economic impact of climate change, an issue of intrinsic importance.

This paper provides the first econometric evidence for diagnostic expectations (DE) in DSGE models. Using the identification framework of Qu and Tkachenko (2017), I show that DE generate dynamics unattainable under rational expectations (RE), with no RE parameterization capable of matching the volatility and persistence patterns implied by DE. Consequently, DE are not observationally equivalent to RE and constitute an endogenous source of macroeconomic fluctuations, distinct from both structural frictions and exogenous shocks. From an econometric perspective, DE preserve overall model identification but weaken the identification of shock variances. To ensure robust conclusions across estimation methods and equilibrium conditions, I extend Bayesian estimation with Sequential Monte Carlo sampling to the indeterminacy domain. These findings advance the econometric study of expectations and highlight the macroeconomic relevance of diagnostic beliefs.

The link between attitudes and behaviour has been a key topic in choice modelling for two decades, with the widespread application of ever more complex hybrid choice models. This paper proposes a flexible and transparent alternative framework for empirically examining the relationship between attitudes and behaviours using latent class choice models (LCCMs). Rather than embedding attitudinal constructs within the structural model, as in hybrid choice frameworks, we recover class-specific attitudinal profiles through posterior inference. This approach enables analysts to explore attitude-behaviour associations without the complexity and convergence issues often associated with integrated estimation. Two case studies are used to demonstrate the framework: one on employee preferences for working from home, and another on public acceptance of COVID-19 vaccines. Across both studies, we compare posterior profiling of indicator means, fractional multinomial logit (FMNL) models, factor-based representations, and hybrid specifications. We find that posterior inference methods provide behaviourally rich insights with minimal additional complexity, while factor-based models risk discarding key attitudinal information, and fullinformation hybrid models offer little gain in explanatory power and incur substantially greater estimation burden. Our findings suggest that when the goal is to explain preference heterogeneity, posterior inference offers a practical alternative to hybrid models, one that retains interpretability and robustness without sacrificing behavioural depth.

We introduce a new risk modeling framework where chaotic attractors shape the geometry of Bayesian inference. By combining heavy-tailed priors with Lorenz and Rossler dynamics, the models naturally generate volatility clustering, fat tails, and extreme events. We compare two complementary approaches: Model A, which emphasizes geometric stability, and Model B, which highlights rare bursts using Fibonacci diagnostics. Together, they provide a dual perspective for systemic risk analysis, linking Black Swan theory to practical tools for stress testing and volatility monitoring.

We study the estimation of peer effects through social networks when researchers do not observe the entire network structure. Special cases include sampled networks, censored networks, and misclassified links. We assume that researchers can obtain a consistent estimator of the distribution of the network. We show that this assumption is sufficient for estimating peer effects using a linear-in-means model. We provide an empirical application to the study of peer effects on students' academic achievement using the widely used Add Health database, and show that network data errors have a large downward bias on estimated peer effects.

A decision rule is epsilon-minimax if it is minimax up to an additive factor epsilon. We present an algorithm for provably obtaining epsilon-minimax solutions of statistical decision problems. We are interested in problems where the statistician chooses randomly among I decision rules. The minimax solution of these problems admits a convex programming representation over the (I-1)-simplex. Our suggested algorithm is a well-known mirror subgradient descent routine, designed to approximately solve the convex optimization problem that defines the minimax decision rule. This iterative routine is known in the computer science literature as the hedge algorithm and it is used in algorithmic game theory as a practical tool to find approximate solutions of two-person zero-sum games. We apply the suggested algorithm to different minimax problems in the econometrics literature. An empirical application to the problem of optimally selecting sites to maximize the external validity of an experimental policy evaluation illustrates the usefulness of the suggested procedure.

This paper estimates the stochastic process of how dementia incidence evolves over time. We proceed in two steps: first, we estimate a time trend for dementia using a multi-state Cox model. The multi-state model addresses problems of both interval censoring arising from infrequent measurement and also measurement error in dementia. Second, we feed the estimated mean and variance of the time trend into a Kalman filter to infer the population level dementia process. Using data from the English Longitudinal Study of Aging (ELSA), we find that dementia incidence is no longer declining in England. Furthermore, our forecast is that future incidence remains constant, although there is considerable uncertainty in this forecast. Our two-step estimation procedure has significant computational advantages by combining a multi-state model with a time series method. To account for the short sample that is available for dementia, we derive expressions for the Kalman filter's convergence speed, size, and power to detect changes and conclude our estimator performs well even in short samples.

We propose an adjusted 2SLS estimator for social network models when reported binary network links are misclassified (some zeros reported as ones and vice versa) due, e.g., to survey respondents' recall errors, or lapses in data input. We show misclassification adds new sources of correlation between the regressors and errors, which makes all covariates endogenous and invalidates conventional estimators. We resolve these issues by constructing a novel estimator of misclassification rates and using those estimates to both adjust endogenous peer outcomes and construct new instruments for 2SLS estimation. A distinctive feature of our method is that it does not require structural modeling of link formation. Simulation results confirm our adjusted 2SLS estimator corrects the bias from a naive, unadjusted 2SLS estimator which ignores misclassification and uses conventional instruments. We apply our method to study peer effects in household decisions to participate in a microfinance program in Indian villages.

This paper presents the Stata community-distributed command "opl_ma_fb" (and the companion command "opl_ma_vf"), for implementing the first-best Optimal Policy Learning (OPL) algorithm to estimate the best treatment assignment given the observation of an outcome, a multi-action (or multi-arm) treatment, and a set of observed covariates (features). It allows for different risk preferences in decision-making (i.e., risk-neutral, linear risk-averse, and quadratic risk-averse), and provides a graphical representation of the optimal policy, along with an estimate of the maximal welfare (i.e., the value-function estimated at optimal policy) using regression adjustment (RA), inverse-probability weighting (IPW), and doubly robust (DR) formulas.

Accurate forecasting of exchange rates remains a persistent challenge, particularly for emerging economies such as Brazil, Russia, India, and China (BRIC). These series exhibit long memory, nonlinearity, and non-stationarity properties that conventional time series models struggle to capture. Additionally, there exist several key drivers of exchange rate dynamics, including global economic policy uncertainty, US equity market volatility, US monetary policy uncertainty, oil price growth rates, and country-specific short-term interest rate differentials. These empirical complexities underscore the need for a flexible modeling framework that can jointly accommodate long memory, nonlinearity, and the influence of external drivers. To address these challenges, we propose a Neural AutoRegressive Fractionally Integrated Moving Average (NARFIMA) model that combines the long-memory representation of ARFIMA with the nonlinear learning capacity of neural networks, while flexibly incorporating exogenous causal variables. We establish theoretical properties of the model, including asymptotic stationarity of the NARFIMA process using Markov chains and nonlinear time series techniques. We quantify forecast uncertainty using conformal prediction intervals within the NARFIMA framework. Empirical results across six forecast horizons show that NARFIMA consistently outperforms various state-of-the-art statistical and machine learning models in forecasting BRIC exchange rates. These findings provide new insights for policymakers and market participants navigating volatile financial conditions. The \texttt{narfima} \textbf{R} package provides an implementation of our approach.