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The stochastic approach to price index numbers: An expository note

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  • Ogwang, Tomson

Abstract

The present paper provides an objective basis for selecting the best among four commonly used price index numbers, namely the Laspeyres price index, the Paasche price index, the simple aggregative price index and the simple arithmetic mean of price relatives. The criterion is developed within a stochastic framework that also enables researchers to test hypotheses about the index numbers themselves. The paper also provides nonparametric interpretations of these indices.

Suggested Citation

  • Ogwang, Tomson, 1995. "The stochastic approach to price index numbers: An expository note," Economics Letters, Elsevier, vol. 49(4), pages 373-379, October.
    • Handle: RePEc:eee:ecolet:v:49:y:1995:i:4:p:373-379
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    References listed on IDEAS

    as
    1. Selvanathan, E A, 1989. "A Note on the Stochastic Approach to Index Numbers," Journal of Business & Economic Statistics, American Statistical Association, vol. 7(4), pages 471-474, October.
    2. R. G. D. Allen, 1975. "Index Numbers in Theory and Practice," Palgrave Macmillan Books, Palgrave Macmillan, number 978-1-349-02312-7, March.
    3. Clements, Kenneth W & Izan, H Y, 1987. "The Measurement of Inflation: A Stochastic Approach," Journal of Business & Economic Statistics, American Statistical Association, vol. 5(3), pages 339-350, July.
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    Cited by:

    1. Leslaw Gajek & Marek Kaluszka, 2015. "On the martingale-fair index of return for investment funds," Papers 1501.03768, arXiv.org.
    2. Tomson Ogwang, 2022. "The regression approach to the measurement and decomposition of the multidimensional Watts poverty index," The Journal of Economic Inequality, Springer;Society for the Study of Economic Inequality, vol. 20(4), pages 951-973, December.

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