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Tests of stochastic monotonicity with improved power

Juwon Seo

Journal of Econometrics, 2018, vol. 207, issue 1, 53-70

Abstract: We develop improved statistical procedures for testing stochastic monotonicity. While existing tests use a fixed critical value to set the limiting rejection rate equal to nominal size at the least favorable case, we use a bootstrap procedure to raise the limiting rejection rate to nominal size over much of the null. This improves power against relevant local alternatives. To show the validity of our approach we draw on recent results on the directional differentiability of the least concave majorant operator, and on bootstrap inference when smoothness conditions sufficient to apply the functional delta method for the bootstrap are not satisfied.

Keywords: Stochastic monotonicity; Copula; Least concave majorant; Hadamard differentiability; Hadamard directional differentiability (search for similar items in EconPapers)
JEL-codes: C14 C15 (search for similar items in EconPapers)
Date: 2018
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Handle: RePEc:eee:econom:v:207:y:2018:i:1:p:53-70