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Testing for stochastic monotonicity

Lee, Sokbae and Linton, Oliver and Whang, Yoon-Jae (2009) Testing for stochastic monotonicity. Econometrica, 77 (2). pp. 585-602. ISSN 0012-9682

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Identification Number: 10.3982/ECTA7145

Abstract

We propose a test of the hypothesis of stochastic monotonicity. This hypothesis is of interest in many applications in economics. Our test is based on the supremum of a rescaled U-statistic. We show that its asymptotic distribution is Gumbel. The proof is difficult because the approximating Gaussian stochastic process contains both a stationary and a nonstationary part, and so we have to extend existing results that only apply to either one or the other case. We also propose a refinement to the asymptotic approximation that we show works much better in finite samples. We apply our test to the study of intergenerational income mobility.

Item Type: Article
Official URL: http://onlinelibrary.wiley.com/journal/10.1111/(IS...
Additional Information: © 2009 Wiley-Blackwell
Subjects: H Social Sciences > HB Economic Theory
Sets: Departments > Economics
Collections > Economists Online
Research centres and groups > Suntory and Toyota International Centres for Economics and Related Disciplines (STICERD)
Research centres and groups > Financial Markets Group (FMG)
Date Deposited: 07 Dec 2010 13:16
Last Modified: 07 Dec 2010 13:16
URI: http://eprints.lse.ac.uk/id/eprint/30597

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