The simple econometrics of tail dependence
AbstractThe aim of this paper is to show that measures on tail dependence can be estimated in a convenient way by regression analysis. This yields the same estimates as the non-parametric method within the multivariate Extreme Value Theory framework. The advantage of the regression approach is contained by its straightforward extension to the estimation of higher dimensional tail dependence. We provide an example on international stock markets. The regression approach to tail dependence can be applied to estimate several measures of systemic importance of financial institutions in the literature.
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Bibliographic InfoPaper provided by Netherlands Central Bank, Research Department in its series DNB Working Papers with number 296.
Date of creation: May 2011
Date of revision:
Tail dependence; Regression analysis; Extreme Value Theory; Systemic risk;
Other versions of this item:
- C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General
- C58 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Financial Econometrics
This paper has been announced in the following NEP Reports:
- NEP-ALL-2011-05-30 (All new papers)
- NEP-BAN-2011-05-30 (Banking)
- NEP-ECM-2011-05-30 (Econometrics)
- NEP-RMG-2011-05-30 (Risk Management)
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