Increasing Interdependence of Multivariate Distributions

Margaret Meyer and Bruno Strulovici

Discussion Papers from Northwestern University, Center for Mathematical Studies in Economics and Management Science

Abstract: Orderings of interdependence among random variables are useful in many economic contexts, for example, in assessing ex post inequality under uncertainty; in comparing multidimensional inequality; in valuing portfolios of assets or insurance policies; and in assessing systemic risk. We explore five orderings of interdependence for multivariate distributions: greater weak association, the supermodular ordering, the convex-modular ordering, the dispersion ordering, and the concordance ordering. For two dimensions, all five orderings are equivalent, whereas for an arbitrary number of dimensions n > 2, the five orderings are strictly ranked. For the special case of binary random variables, we establish some equivalences among the orderings.

Keywords: dependence ordering; stochastic orders; supermodularity; weak association; concordance JEL Classification Numbers: D63, D81, G11, G22 (search for similar items in EconPapers)
Date: 2011-03-01
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Journal Article: Increasing interdependence of multivariate distributions (2012)
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