Hierarchical Kendall copulas: properties and inference
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Publication:5413640
DOI10.1002/CJS.11204zbMATH Open1349.62172arXiv1202.1998OpenAlexW2150576268MaRDI QIDQ5413640FDOQ5413640
Authors: Eike Christian Brechmann 
Publication date: 30 April 2014
Published in: The Canadian Journal of Statistics (Search for Journal in Brave)
Abstract: While there is substantial need for dependence models in higher dimensions, most existing models quickly become rather restrictive and barely balance parsimony and flexibility. Hierarchical constructions may improve on that by grouping variables in different levels. In this paper, the new class of hierarchical Kendall copulas is proposed and discussed. Hierarchical Kendall copulas are built up by flexible copulas specified for groups of variables, where aggregation is facilitated by the Kendall distribution function, the multivariate analog to the probability integral transform for univariate random variables. After deriving properties of the general model formulation, particular focus is given to inference techniques of hierarchical Kendall copulas with Archimedean components, for which closed-form analytical expressions can be derived. A substantive application to German stock returns finally shows that hierarchical Kendall copulas perform very well for real data, out-of- as well as in-sample.
Full work available at URL: https://arxiv.org/abs/1202.1998
Recommendations
Sampling theory, sample surveys (62D05) Characterization and structure theory for multivariate probability distributions; copulas (62H05) Applications of statistics to actuarial sciences and financial mathematics (62P05) Characterization and structure theory of statistical distributions (62E10)
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