Rearranging Edgeworth-Cornish-Fisher Expansions
Massachusetts Institute of Technology (MIT) - Department of Economics; New Economic School
Boston University - Department of Economics
Sciences Po - Department of Economics; NYU, Department of Economics and Courant Institute
August 13, 2007
Economic Theory, Vol. 42, No. 2, pp. 419-435, 2010
MIT Department of Economics Working Paper No. 07-20
This paper applies a regularization procedure called increasing rearrangement to monotonize Edgeworth and Cornish-Fisher expansions and any other related approximations of distribution and quantile functions of sample statistics. Besides satisfying the logical monotonicity, required of distribution and quantile functions, the procedure often delivers strikingly better approximations to the distribution and quantile functions of the sample mean than the original Edgeworth-Cornish-Fisher expansions.
Number of Pages in PDF File: 23
Keywords: Edgeworth expansion, Cornish-Fisher expansion, rearrangement
JEL Classification: J02, E20, P20
Date posted: August 15, 2007 ; Last revised: April 9, 2011
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