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Abstract:

Econometrics Paper
TESTING FOR STOCHASTIC MONOTONICITY
Sokbae Lee, Oliver Linton and Yoon-Jae Whang
August 2006
Paper No' EM/2006/504:
Full Paper (pdf)

JEL Classification: C14; C15


Tags: distribution function; extreme value theory; gaussian process; monotonicity.

We propose a test of the hypothesis of stochastic monotonicity. This hypothesis is of interest in many applications. 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.