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Robustness of Bayesian results for Inverse Gaussian distribution under ML-II epsilon-contaminated and Edgeworth Series class of prior distributions

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  • Sinha, Pankaj
  • Jayaraman, Prabha

Abstract

This paper aims to study the sensitivity of Bayes estimate of location parameter of an Inverse Gaussian (IG) distribution to misspecification in the prior distribution. It also studies the effect of misspecification of the prior distribution on two-sided predictive limits for a future observation from IG population. Two prior distributions, a class ML-II ε-contaminated and Edgeworth Series (ESD), are employed for the location parameter of an IG distribution, to investigate the effect of misspecification in the priors. The numerical illustrations suggest that moderate amount of misspecification in prior distributions belonging to the class of ML-II ε-contaminated and ESD does not affect the Bayesian results.

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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 15396.

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Date of creation: 17 May 2009
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Handle: RePEc:pra:mprapa:15396

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Keywords: Bayesian results; Inverse Gaussian distribution; ML-II ε-contaminated prior; Edgeworth Series Distributions;

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  1. Saralees Nadarajah & Samuel Kotz, 2007. "Inverse Gaussian random variables with application to price indices," Applied Economics Letters, Taylor & Francis Journals, vol. 14(9), pages 673-677.
  2. Pankaj Sinha & Ashok Bansal, 2008. "Bayesian optimization analysis with ML-II ε-contaminated prior," Journal of Applied Statistics, Taylor & Francis Journals, vol. 35(2), pages 203-211.
  3. Whitmore, G. A., 1976. "Management applications of the inverse gaussian distribution," Omega, Elsevier, vol. 4(2), pages 215-223.
  4. James Berger & Elías Moreno & Luis Pericchi & M. Bayarri & José Bernardo & Juan Cano & Julián Horra & Jacinto Martín & David Ríos-Insúa & Bruno Betrò & A. Dasgupta & Paul Gustafson & Larry Wass, 1994. "An overview of robust Bayesian analysis," TEST: An Official Journal of the Spanish Society of Statistics and Operations Research, Springer, vol. 3(1), pages 5-124, June.
  5. Aase, Knut K., 2000. "An equilibrium asset pricing model based on Lévy processes: relations to stochastic volatility, and the survival hypothesis," Insurance: Mathematics and Economics, Elsevier, vol. 27(3), pages 345-363, December.
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