The Effects of Rounding on Likelihood Procedures

The aim of this paper is to investigate the robustness properties of likelihood inference with respect to rounding effects. Attention is focused on exponential families and on inference about a scalar parameter of interest, also in the presence of nuisance parameters. A summary value of the influence function of a given statistic, the local-shift sensitivity, is considered. It accounts for small fluctuations in the observations. The main result is that the local-shift sensitivity is bounded for the usual likelihood-based statistics, i.e. the directed likelihood, the Wald and score statistics. It is also bounded for the modified directed likelihood, which is a higher-order adjustment of the directed likelihood. The practical implication is that likelihood inference is expected to be robust with respect to rounding effects. Theoretical analysis is supplemented and confirmed by a number of Monte Carlo studies, performed to assess the coverage probabilities of confidence intervals based on likelihood procedures when data are rounded. In addition, simulations indicate that the directed likelihood is less sensitive to rounding effects than the Wald and score statistics. This provides another criterion for choosing among first-order equivalent likelihood procedures. The modified directed likelihood shows the same robustness as the directed likelihood, so that its gain in inferential accuracy does not come at the price of an increase in instability with respect to rounding.