Simulation-assisted saddlepoint approximation

A general saddlepoint/Monte Carlo method to approximate (conditional) multivariate probabilities is presented. This method requires a tractable joint moment generating function (m.g.f.), but does not require a tractable distribution or density. The method is easy to program and has a third-order accuracy with respect to increasing sample size in contrast to standard asymptotic approximations which are typically only accurate to the first order.

The method is most easily described in the context of a continuous regular exponential family. Here, inferences can be formulated as probabilities with respect to the joint density of the sufficient statistics or the conditional density of some sufficient statistics given the others. Analytical expressions for these densities are not generally available, and it is often not possible to simulate exactly from the conditional distributions to obtain a direct Monte Carlo approximation of the required integral. A solution to the first of these problems is to replace the intractable density by a highly accurate saddlepoint approximation. The second problem can be addressed via importance sampling, that is, an indirect Monte Carlo approximation involving simulation from a crude approximation to the true density. Asymptotic normality of the sufficient statistics suggests an obvious candidate for an importance distribution.

The more general problem considers the computation of a joint probability for a subvector of random T, given its complementary subvector, when its distribution is intractable, but its joint m.g.f. is computable. For such settings, the distribution may be tilted, maintaining T as the sufficient statistic. Within this tilted family, the computation of such multivariate probabilities proceeds as described for the exponential family setting.     

The Future of Statistics

It is possible for a nonnormal bivariate distribution to have conditional distribution functions that are normal in both directions. This article presents several examples, with graphs, including a counterintuitive bimodal joint density. The graphs simultaneously display the joint density and the conditional density functions, which appear as Gaussian curves in the three-dimensional plots.     

Simple expressions for a bivariate chisquare distribution

The joint distribution of the estimated variances from a correlated bivariate normal distribution has a long history. However, its joint probability density function, conditional moments and product moments are only known as infinite series. In this paper, simpler expressions, mostly finite sums of elementary functions, are derived for these properties. Expressions are also derived for the joint moment generating function and the joint characteristic function.     

Limited information bayesian analysis of a structural coefficient in a simultaneous equations system

An analytical expression is obtained for the marginal posterior density for a structural coefficient in a simultaneous equations system based on a limited information Bayesian analysis. A con- ditional posterior density is obtained given reduced form para- meters. This conditional posterior density is in univariate student t form. Numerical examples suggest that the conditional density hasa tighter distribution around the posterior mean than the unconditional density when the correlation between the endo- genous variables and the structural error term is high.     

Gains from joint cross validation bandwidth selection for derivatives of conditional multidimensional densities

This paper studies bandwidth selection for kernel estimation of derivatives of multidimensional conditional densities, a non-parametric realm unexplored in the literature. This paper extends Baird [Cross validation bandwidth selection for derivatives of multidimensional densities. RAND Working Paper series, WR-1060; 2014] in its examination of conditional multivariate densities, derives and presents criteria for arbitrary kernel order and density dimension, shows consistency of the estimators, and investigates a minimization criterion which jointly estimates numerator and denominator bandwidths. I conduct a Monte Carlo simulation study for various orders of kernels in the Gaussian family and compare the new cross validation criterion with those implied by Baird [Cross validation bandwidth selection for derivatives of multidimensional densities. RAND Working Paper series, WR-1060; 2014]. The paper finds that higher order kernels become increasingly important as the dimension of the distribution increases. I find that the cross validation criterion developed in this paper that jointly estimates the derivative of the joint density (numerator) and the marginal density (denominator) does orders of magnitude better than criteria that estimate the bandwidths separately. I further find that using the infinite order Dirichlet kernel tends to have the best results.     

A bivariate distribution with gamma and beta marginals with application to drought data

The first known bivariate distribution with gamma and beta marginals is introduced. Various representations are derived for its joint probability density function (pdf), joint cumulative distribution function (cdf), product moments, conditional pdfs, conditional cdfs, conditional moments, joint moment generating function, joint characteristic function and entropies. The method of maximum likelihood and the method of moments are used to derive the associated estimation procedures as well as the Fisher information matrix, variance–covariance matrix and the profile likelihood confidence intervals. An application to drought data from Nebraska is provided. Some other applications are also discussed. Finally, an extension of the bivariate distribution to the multivariate case is proposed.     

Semiparametric ARCH Models

This article introduces a semiparametric autoregressive conditional heteroscedasticity (ARCH) model that has conditional first and second moments given by autoregressive moving average and ARCH parametric formulations but a conditional density that is assumed only to be sufficiently smooth to be approximated by a nonparametric density estimator. For several particular conditional densities, the relative efficiency of the quasi-maximum likelihood estimator is compared with maximum likelihood under correct specification. These potential efficiency gains for a fully adaptive procedure are compared in a Monte Carlo experiment with the observed gains from using the proposed semiparametric procedure, and it is found that the estimator captures a substantial proportion of the potential. The estimator is applied to daily stock returns from small firms that are found to exhibit conditional skewness and kurtosis and to the British pound to dollar exchange rate.     

Numerical computation of bridge probabilities

This paper contains an analysis of the problem of computing the joint probability density of the honor card point count in each of four hands in the game of bridge. Efficient representation of the data is considered. Computational algorithms are given for dealing with a compressed form of the density. From the joint density, the densities of the point count in the best and worst hands are obtained. Also obtained is the conditional distribution that a partnership has m points given that one of the partners has n1 points.     

A Note on Ergodic Processes Prediction via Estimation of the Conditional Mode Function

We establish the uniform almost-sure convergence of a kernel estimate of the conditional density for an ergodic process. A useful application to the prediction of the ergodic process via the conditional mode function is also given.     

Further results on multivariate vertical density representation and an application to random vector generation *

In this paper we further develop the theory of vertical density representation (VDR) in the multivariate case and provide a formula for the calculation of the conditional probability density of a random vector when its density value is given. An application to random vector generation is also given.     

Lower dimensional marginal density functions of absolutely continuous truncated multivariate distributions

The lower dimensional marginal density functions of a truncated multivariate density function is derived in general, and shown that it is a function of untruncated marginal density function, appropriately defined conditional distribution function and size of the multivariate truncation region. As a special case, lower dimensional marginal density function of a truncated multivariate normal distribution is given.     

A Conditional Density Approach to the Order Determination of Time Series

The study focuses on the selection of the order of a general time series process via the conditional density of the latter, a characteristic of which is that it remains constant for every order beyond the true one. Using simulated time series from various nonlinear models we illustrate how this feature can be traced from conditional density estimation. We study whether two statistics derived from the likelihood function can serve as univariate statistics to determine the order of the process. It is found that a weighted version of the log likelihood function has desirable robust properties in detecting the order of the process.     

Forecasting Value at Risk and Expected Shortfall Using a Semiparametric Approach Based on the Asymmetric Laplace Distribution

Value at Risk (VaR) forecasts can be produced from conditional autoregressive VaR models, estimated using quantile regression. Quantile modeling avoids a distributional assumption, and allows the dynamics of the quantiles to differ for each probability level. However, by focusing on a quantile, these models provide no information regarding expected shortfall (ES), which is the expectation of the exceedances beyond the quantile. We introduce a method for predicting ES corresponding to VaR forecasts produced by quantile regression models. It is well known that quantile regression is equivalent to maximum likelihood based on an asymmetric Laplace (AL) density. We allow the density's scale to be time-varying, and show that it can be used to estimate conditional ES. This enables a joint model of conditional VaR and ES to be estimated by maximizing an AL log-likelihood. Although this estimation framework uses an AL density, it does not rely on an assumption for the returns distribution. We also use the AL log-likelihood for forecast evaluation, and show that it is strictly consistent for the joint evaluation of VaR and ES. Empirical illustration is provided using stock index data. Supplementary materials for this article are available online.     

Nonparametric forecasting: a comparison of three kernel-based methods

In this paper the use of three kernel-based nonparametric forecasting methods - the conditional mean, the conditional median, and the conditional mode -is explored in detail. Several issues related to the estimation of these methods are discussed, including the choice of the bandwidth and the type of kernel function. The out-of-sample forecasting performance of the three nonparametric methods is investigated using 60 real time series. We find that there is no superior forecast method for series having approximately less than 100 observations. However, when a time series is long or when its conditional density is bimodal there is quite a difference between the forecasting performance of the three kernel-based forecasting methods.     

Uniform in bandwidth consistency for various kernel estimators involving functional data

The paper investigates various nonparametric models including regression, conditional distribution, conditional density and conditional hazard function, when the covariates are infinite dimensional. The main contribution is to prove uniform in bandwidth asymptotic results for kernel estimators of these functional operators. Then, the application issues, involving data-driven bandwidth selection, are discussed.     

Joint response graphs and separation induced by triangular systems

Summary.  We consider joint probability distributions generated recursively in terms of univariate conditional distributions satisfying conditional independence restrictions. The independences are captured by missing edges in a directed graph. A matrix form of such a graph, called the generating edge matrix, is triangular so the distributions that are generated over such graphs are called triangular systems. We study consequences of triangular systems after grouping or reordering of the variables for analyses as chain graph models, i.e. for alternative recursive factorizations of the given density using joint conditional distributions. For this we introduce families of linear triangular equations which do not require assumptions of distributional form. The strength of the associations that are implied by such linear families for chain graph models is derived. The edge matrices of chain graphs that are implied by any triangular system are obtained by appropriately transforming the generating edge matrix. It is shown how induced independences and dependences can be studied by graphs, by edge matrix calculations and via the properties of densities. Some ways of using the results are illustrated.     

Approximate multivariate conditional inference using the adjusted profile likelihood

The author proposes saddlepoint approximation methods that are adapted to multivariate conditional inference in canonical exponential familles. Several approaches to approximating conditional discrete distributions involve dividing an approximation to the full joint mass function, summed over tail regions of interest, by an approximate marginal density. The author first approximates this conditional likelihood by the adjusted profile likelihood, and then applies a multivariate saddlepoint approximation. He also presents formulas to aid in performing simultaneously the profiling and maximizing steps.     

Dimension reduction summaries for balanced contrasts

We discuss the covariate dimension reduction properties of conditional density ratios in the estimation of balanced contrasts of expectations. Conditional density ratios, as well as related sufficient summaries, can be used to replace the covariates with a smaller number of variables. For example, for comparisons among k   populations the covariates can be replaced with k-1$k-1$ conditional density ratios. The dimension reduction properties of conditional density ratios are directly connected with sufficiency, the dimension reduction concepts considered in regression theory, and propensity theory. The theory presented here extends the ideas in propensity theory to situations in which propensities do not exist and develops an approach to dimension reduction outside of the potential outcomes or counterfactual framework. Under general conditions, we show that a principal components transformation of the estimated conditional density ratios can be used to investigate whether a sufficient summary of dimension lower than k-1$k-1$ exists and to identify such a lower dimensional summary.     

Sequential order statistics from dependent random variables

Abstract

This paper provides an extension for “sequential order statistics” (SOS) introduced by Kamps. It is called “developed sequential order statistics” (DSOS) and is useful for describing lifetimes of engineering systems when component lifetimes are dependent. Explicit expressions for the joint density function, the marginal distributions and the means of DSOS are derived. Under the well known “conditional proportional hazard rate” (CPHR) model and the Gumbel families of copulas for dependency among component lifetimes, some findings are reported. For example, it is proved that the joint density functions of DSOS and SOS have the same structure. Various illustrative examples are also given.     

FDA: strong consistency of the kNN local linear estimation of the functional conditional density and mode

In this paper we present a new estimator of the conditional density and mode when the co-variables are of functional kind. This estimator is a combination of both, the k-Nearest Neighbours procedure and the functional local linear estimation. Then, for each statistical parameter (conditional density or mode), results concerning the strong consistency and rate of convergence of the estimators are presented. Finally, their performances, for finite sample sizes, are illustrated by using simulated data.