Models as Approximations - A Conspiracy of Random Regressors and Model Deviations Against Classical Inference in Regression

. More than thirty years ago Halbert White inaugurated a “modelrobust” form of statistical inference based on the “sandwich estimator” of standard error. It is asymptotically correct even under “model misspecification,” that is, when models are approximations rather than generative truths. It is well-known to be “heteroskedasticity-consistent”, but it is less well-known to be “nonlinearity-consistent” as well. Nonlinearity, however, raises...