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Author
C. Diks
V. Panchenko
D. van Dijk
Year
2008
Title
Out-of-sample comparison of copula specifications in multivariate density forecasts
Number of pages
25
Publisher
onbekend: Tinbergen Instituut
Serie
Tinbergen Institute discussion papers
Volume | Edition (Serie)
TI 2008-105/4
Document type
Report
Faculty
Faculty of Economics and Business (FEB)
Institute
Amsterdam School of Economics Research Institute (ASE-RI)
Abstract
We introduce a statistical test for comparing the predictive accuracy of competing copula specifications in multivariate density forecasts, based on the Kullback-Leibler Information Criterion (KLIC). The test is valid under general conditions: in particular it allows for parameter estimation uncertainty and for the copulas to be nested or non-nested. Monte Carlo simulations demonstrate that the proposed test has satisfactory size and power properties in finite samples. Applying the test to daily exchange rate returns of several major currencies against the US dollar we find that the Student's t copula is favored over Gaussian, Gumbel and Clayton copulas. This suggests that these exchange rate returns are characterized by symmetric tail dependence.
Link
Link
Language
Undefined/Unknown
Permalink
http://hdl.handle.net/11245/1.301121

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