Reconstructing high dimensional dynamic distributions from distributions of lower dimension
AbstractWe propose a new sequential procedure for estimating a dynamic joint distribution of a group of assets. The procedure is motivated by the theory of composite likelihood and by the theory of copula functions. It recovers m-variate distributions by coupling univariate distributions with distributions of dimension m - 1. This copula-based method produces pseudo-maximum-likelihood type estimators of the distribution of all pairs, triplets, quadruples, etc, of assets in the group. Eventually the joint distribution of unrestricted dimension can be recovered. We show that the resulting density can be viewed as a exible factorization of the underlying true distribution, subject to an approximation error. Therefore, it inherits the well known asymptotic properties of the conventional copula-based pseudo-MLE but offers important advantages. Specifically, the proposed procedure trades the dimensionality of the parameter space for numerous simpler estimations, making it feasible when conventional methods fail in finite samples. Even though there are more optimization problems to solve, each is of a much lower dimension. In addition, the parameterization tends to be much more exible. Using a GARCH-type application from stock returns, we demonstrate how the new procedure provides excellent fit when the dimension is moderate and how it remains operational when the conventional method fails due to high dimensionality.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Center for Economic and Financial Research (CEFIR) in its series Working Papers with number w0167.
Length: 37 pages
Date of creation: Aug 2013
Date of revision:
Contact details of provider:
Postal: 117418 Russia, Moscow, Nakhimovsky pr., 47, office 720
Phone: +7 (495) 105 50 02
Fax: +7 (495) 105 50 03
Web page: http://www.cefir.ru
More information through EDIRC
pseudo-likelihood; composite likelihood; multivariate distribution; copulas;
Other versions of this item:
- Stanislav Anatolyev & Renat Khabibullin & Artem Prokhorov, 2012. "Reconstructing high dimensional dynamic distributions from distributions of lower dimension," Working Papers, Concordia University, Department of Economics 12003, Concordia University, Department of Economics.
- C13 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Estimation: General
This paper has been announced in the following NEP Reports:
You can help add them by filling out this form.
reading list or among the top items on IDEAS.Access and download statisticsgeneral information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Julia Babich).
If references are entirely missing, you can add them using this form.