On the transitivity of the comonotonic and countermonotonic comparison of random variables

H. De Meyer, B. De Baets and B. De Schuymer

Journal of Multivariate Analysis, 2007, vol. 98, issue 1, 177-193

Abstract: A recently proposed method for the pairwise comparison of arbitrary independent random variables results in a probabilistic relation. When restricted to discrete random variables uniformly distributed on finite multisets of numbers, this probabilistic relation expresses the winning probabilities between pairs of hypothetical dice that carry these numbers and exhibits a particular type of transitivity called dice-transitivity. In case these multisets have equal cardinality, two alternative methods for statistically comparing the ordered lists of the numbers on the faces of the dice have been studied recently: the comonotonic method based upon the comparison of the numbers of the same rank when the lists are in increasing order, and the countermonotonic method, also based upon the comparison of only numbers of the same rank but with the lists in opposite order. In terms of the discrete random variables associated to these lists, these methods each turn out to be related to a particular copula that joins the marginal cumulative distribution functions into a bivariate cumulative distribution function. The transitivity of the generated probabilistic relation has been completely characterized. In this paper, the list comparison methods are generalized for the purpose of comparing arbitrary random variables. The transitivity properties derived in the case of discrete uniform random variables are shown to be generic. Additionally, it is shown that for a collection of normal random variables, both comparison methods lead to a probabilistic relation that is at least moderately stochastic transitive.

Keywords: Comonotonicity; Comparison; of; random; variables; Copulas; Countermonotonicity; Cycle-transitivity; Probabilistic; relation; Transitivity (search for similar items in EconPapers)
Date: 2007
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Citations: View citations in EconPapers (3)

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