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Testing for Independence in Multivariate Duration Models

Author

Listed:
  • Söderberg, Hans

    (Department of Information Science, Division of Statistics)

  • Lyhagen, Johan

    (Dept. of Economic Statistics, Stockholm School of Economics)

Abstract

Modelling multivariate failure times in a competing risks setting is often performed by assuming independence between risks. However, by wrongly assuming independence, seriously biased parameter estimates may result. The aim of this paper is to evaluate a test for independence previously proposed in the literature. The test is an information matrix test which is evaluated by Monte Carlo methods. The basic duration model used in the simulations is of the mixed proportional hazards type with Weibull distributed latent failure times. We find the sampling distribution of the test statistic to deviate from the anticipated asymptotic one. However, by applying bootstrap methods it seems that proper critical values can be obtained. Further, the power of the test is found to be highly asymmetrical with respect to the sign of the correlation between risks.

Suggested Citation

  • Söderberg, Hans & Lyhagen, Johan, 1999. "Testing for Independence in Multivariate Duration Models," SSE/EFI Working Paper Series in Economics and Finance 302, Stockholm School of Economics.
    • Handle: RePEc:hhs:hastef:0302
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    Citations

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    Cited by:

    1. Gordana Colby & Paul Rilstone, 2007. "Simplified estimation of multivariate duration models with unobserved heterogeneity," Computational Statistics, Springer, vol. 22(1), pages 17-29, April.
    2. Jill Marie Gunderson & Julie L. Hotchkiss, 2004. "Job separation behavior of welfare recipients: results from a unique case study," FRB Atlanta Working Paper 2004-12, Federal Reserve Bank of Atlanta.

    More about this item

    Keywords

    Competing risks; Information matrix test; Bootstrap;
    All these keywords.

    JEL classification:

    • C12 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Hypothesis Testing: General
    • C41 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Duration Analysis; Optimal Timing Strategies

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