Estimation and inference in factor copula models with exogenous covariates
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Publication:6108312
Abstract: A factor copula model is proposed in which factors are either simulable or estimable from exogenous information. Point estimation and inference are based on a simulated methods of moments (SMM) approach with non-overlapping simulation draws. Consistency and limiting normality of the estimator is established and the validity of bootstrap standard errors is shown. Doing so, previous results from the literature are verified under low-level conditions imposed on the individual components of the factor structure. Monte Carlo evidence confirms the accuracy of the asymptotic theory in finite samples and an empirical application illustrates the usefulness of the model to explain the cross-sectional dependence between stock returns.
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Cited in
(4)- Accounting for endogeneity in regression models using copulas: a step-by-step guide for empirical studies
- Approximate likelihood with proxy variables for parameter estimation in high-dimensional factor copula models
- Extending the inference function for augmented margins method to implement trivariate Clayton copula-based SUR Tobit models
- Least Squares Estimation in Nonstationary Nonlinear Cohort Panels with Learning from Experience
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