Saddle Point Approximation for the Distribution of a Ratio of Quadratic Forms in Normal Variables

Offer Lieberman

No 267395, Department of Econometrics and Business Statistics Working Papers from Monash University, Department of Econometrics and Business Statistics

Abstract: In the present paper, the saddle point approximations to the density and tail probability of a ratio of quadratic forms in normal variables are derived. A numerical exposition via the Durbin-Watson test statistic reveals several desirable features. Beyond their accuracy and robustness to extreme scenarios, the approximations, which only involve a limited number of computable functions, provide the practitioner with an accessible and a very powerful tool.

Keywords: Research; Methods/Statistical; Methods (search for similar items in EconPapers)
Pages: 22
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Persistent link: https://EconPapers.repec.org/RePEc:ags:monebs:267395

DOI: 10.22004/ag.econ.267395

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