34 Pages Posted: 23 Dec 2015 Last revised: 25 Dec 2016
Date Written: December 24, 2016
We study properties of the Rearrangement Algorithm (RA) in the context of inferring dependence among variables given their marginal distributions and the distribution of the sum. We show that the RA yields solutions that are “close to each other” and exhibit almost maximum entropy. The consequence of this result is that the RA can be used as a stable algorithm for inferring a dependence that is economically meaningful.
Keywords: Entropy, Block Rearrangement Algorithm, Inferring dependence, Maximum determinant
JEL Classification: C60
Suggested Citation: Suggested Citation
Bernard, Carole and Bondarenko, Oleg and Vanduffel, Steven, Rearrangement Algorithm and Maximum Entropy (December 24, 2016). Available at SSRN: https://ssrn.com/abstract=2705708 or http://dx.doi.org/10.2139/ssrn.2705708