Quantifying Individual Risk for Binary Outcome: Bounds and Inference

Understanding treatment heterogeneity is crucial for reliable decision-making in treatment evaluation and selection. While the conditional average treatment effect (CATE) is commonly used to capture treatment heterogeneity induced by covariates and design individualized treatment policies, it remains an averaging metric within subpopulations. This limitation prevents it from unveiling individual-level risks, potentially leading to misleading results. This article addresses this gap by examining individual risk for binary outcomes, specifically focusing on the fraction negatively affected (FNA) conditional on covariates – a metric assessing the percentage of individuals experiencing worse outcomes with treatment compared to control. Under the strong ignorability assumption, FNA is unidentifiable, and we find that previous bounds are wide and practically unattainable except in certain degenerate cases. By introducing a plausible positive correlation assumption for the potential outcomes, we obtain significantly improved bounds compared to previous studies. We show that even with a positive and statistically significant CATE, the lower bound on FNA can be positive, i.e., in the best-case scenario many units will be harmed if receiving treatment. We establish a nonparametric sensitivity analysis framework for FNA using the Pearson correlation coefficient as the sensitivity parameter, thereby exploring the relationships among the correlation coefficient, FNA, and CATE. We also present a practical and tractable method for selecting the range of correlation coefficients. Furthermore, we propose flexible estimators for refined FNA bounds and prove their consistency and asymptotic normality.