TY - JOUR
T1 - Confidence band for expectation dependence with applications
AU - Guo, Xu
AU - Li, Jingyuan
N1 - Funding Information:
The authors are grateful to the Editor and anonymous referee for constructive comments and suggestions that led to significant improvement of an early manuscript. The research described here was supported by the Fundamental Research Funds for the Central Universities ( NR2015001 ); the Natural Science Foundation of Jiangsu Province, China , grant No. BK20150732 ; General Research Fund of the Hong Kong Research Grants Council under Research Project No. LU13500814; the Faculty Research Grant of Lingnan University under Research Project No. DR12A9; Direct Grant for Research of Lingnan University under Research Project No. DR13C8.
Publisher Copyright:
© 2015 Elsevier B.V.
PY - 2016/5/1
Y1 - 2016/5/1
N2 - Motivated by the applications of the concept of expectation dependence in economics and finance, we propose a method to construct uniform confidence band for expectation dependence. It is derived based on Hoeffding's inequality. Our proposed confidence band can be explicitly expressed and thus it is very easy to implement. Our method has applications to demand for a risky asset and first-order risk aversion problems. Simulations suggest our proposed confidence interval can control the coverage probabilities very well, and the average lengths are very short. Two empirical applications are presented to illustrate the usefulness of the constructed confidence band of expectation dependence.
AB - Motivated by the applications of the concept of expectation dependence in economics and finance, we propose a method to construct uniform confidence band for expectation dependence. It is derived based on Hoeffding's inequality. Our proposed confidence band can be explicitly expressed and thus it is very easy to implement. Our method has applications to demand for a risky asset and first-order risk aversion problems. Simulations suggest our proposed confidence interval can control the coverage probabilities very well, and the average lengths are very short. Two empirical applications are presented to illustrate the usefulness of the constructed confidence band of expectation dependence.
UR - http://www.scopus.com/inward/record.url?scp=84962449492&partnerID=8YFLogxK
UR - http://www.scopus.com/inward/citedby.url?scp=84962449492&partnerID=8YFLogxK
U2 - 10.1016/j.insmatheco.2015.09.012
DO - 10.1016/j.insmatheco.2015.09.012
M3 - Article
AN - SCOPUS:84962449492
VL - 68
SP - 141
EP - 149
JO - Insurance: Mathematics and Economics
JF - Insurance: Mathematics and Economics
SN - 0167-6687
ER -