Testing for positive quadrant dependence.

ABSTRACT: We develop an empirical likelihood approach to test independence of two univariate random variables X and Y versus the alternative that X and Y are strictly positive quadrant dependent (PQD). Establishing this type of ordering between X and Y is of interest in many applications, including finance, insurance, engineering, and other areas. Adopting the framework in Einmahl and McKeague (2003, Bernoulli), we create a distribution-free test statistic that integrates a localized empirical likelihood ratio test statistic with respect to the empirical joint distribution of X and Y. When compared to well known existing tests and distance-based tests we develop by using copula functions, simulation results show the EL testing procedure

SUBMITTER: Tang CF 

PROVIDER: S-EPMC7597655 | biostudies-literature | 2019

REPOSITORIES: biostudies-literature