Testing for Concordance Ordering
AbstractWe propose inference tools to analyse the ordering of concordance of random vectors. The analysis in the bivariate case relies on tests for upper and lower quadrant dominance of the true distribution by a parametric or semiparametric model, i.e. for a parametric or semiparametric model to give a probability that two variables are simultaneously small or large at least as great as it would be were they left unspecified. Tests for its generalisation in higher dimensions, namely analysed. The parametric and semiparametric setting are based on the copula representation for multivariate distribution, which allows for disentangling behaviour of margins and dependence structure. We propose two types of testing procedures for each setting. The first procedure is based on a formulation of the dominance concepts in terms of values taken by random variables, while the second procedure is based on a formulation in terms of probability levels. For each formulation a distance test and an intersection-union test for inequality constraints are developed depending on the definition of null and alternative hypotheses. An empirical illustration is given for US insurance claim data.
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Bibliographic InfoPaper provided by International Center for Financial Asset Management and Engineering in its series FAME Research Paper Series with number rp41.
Date of creation: Mar 2002
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Nonparametric; Concordance ordering; Quadrant dominance; Orthant dominance; Copula; Inequality constraint tests; Risk management; Loss severity distribution;
Find related papers by JEL classification:
- C12 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Hypothesis Testing: General
- D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
- G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
- G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
- G22 - Financial Economics - - Financial Institutions and Services - - - Insurance; Insurance Companies
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- Decancq, Koen, 2010.
"Copula-based orderings of multivariate dependence,"
Open Access publications from Katholieke Universiteit Leuven
urn:hdl:123456789/267266, Katholieke Universiteit Leuven.
- DECANCQ, Koen, 2010. "Copula-based orderings of multivariate dependence," CORE Discussion Papers 2010012, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- Koen DECANCQ, 2010. "Copula-based orderings of multivariate dependence," Center for Economic Studies - Discussion papers ces10.08, Katholieke Universiteit Leuven, Centrum voor Economische Studiën.
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