Positive Dependence of Signals

Abstract

In this paper we further investigate the problem considered by Mizuno (2006) in the special case of identically distributed signals. Specifically, we first propose an alternative sufficient condition of crossing type for the convex order to hold between the conditional expectations given signal. Then, we prove that the bivariate (2,1)-increasing convex order ensures that the conditional expectations are ordered in the convex sense. Finally, the L 2 distance between the quantity of interest and its conditional expectation given signal (or expected conditional variance) is shown to decrease when the strength of the dependence increases (as measured by the (2,1)-increasing convex order).