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Testing for Asymmetric Dependence

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  • Manner Hans

    (University of Maastricht)

Abstract

We study how to measure and test for differences in dependence for small and large realizations of two variables of interest. We introduce a conditional version of Kendall's tau and provide formulas to evaluate it for any copula of interest. Two tests based on well known copulas are proposed to test the null hypothesis of symmetric dependence and these tests are shown to have higher power than competing tests proposed in the literature. Additionally, we suggest three examples of data generating processes that can lead to asymmetric dependence and study these both analytically and in a Monte Carlo framework. Finally, we illustrate the use of our tests on stock market returns and on quarterly U.S. GNP and unemployment data and we find evidence of asymmetries and nonlinearities.

Suggested Citation

  • Manner Hans, 2010. "Testing for Asymmetric Dependence," Studies in Nonlinear Dynamics & Econometrics, De Gruyter, vol. 14(2), pages 1-32, March.
    • Handle: RePEc:bpj:sndecm:v:14:y:2010:i:2:n:2
    DOI: 10.2202/1558-3708.1658
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    References listed on IDEAS

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    1. Lorenzo Cappiello & Bruno Gérard & Arjan Kadareja & Simone Manganelli, 2014. "Measuring Comovements by Regression Quantiles," Journal of Financial Econometrics, Oxford University Press, vol. 12(4), pages 645-678.
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    5. Ang, Andrew & Chen, Joseph, 2002. "Asymmetric correlations of equity portfolios," Journal of Financial Economics, Elsevier, vol. 63(3), pages 443-494, March.
    6. Hans Manner & Bertrand Candelon, 2010. "Testing For Asset Market Linkages: A New Approach Based On Time‐Varying Copulas," Pacific Economic Review, Wiley Blackwell, vol. 15(3), pages 364-384, August.
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    Cited by:

    1. David Zimmer, 2015. "Asymmetric dependence in house prices: evidence from USA and international data," Empirical Economics, Springer, vol. 49(1), pages 161-183, August.
    2. Andrey Bedin & Alexander Kulikov & Andrey Polbin, 2023. "Copula-Based Modelling of Relationship Between Dollar/Rouble Exchange Rate and Oil Prices," Russian Journal of Money and Finance, Bank of Russia, vol. 82(3), pages 87-109, September.
    3. Zhang, Feipeng & Xu, Yixiong & Yuan, Di, 2024. "Detecting financial contagion using a new nonparametric measure of asymmetric comovements," International Review of Economics & Finance, Elsevier, vol. 89(PA), pages 284-296.
    4. Linyu Cao & Ruili Sun & Tiefeng Ma & Conan Liu, 2023. "On Asymmetric Correlations and Their Applications in Financial Markets," JRFM, MDPI, vol. 16(3), pages 1-18, March.
    5. Henryk Gurgul & Robert Syrek, 2010. "Polish stock market and some foreign markets - dependence analysis by regime-switching copulas," Managerial Economics, AGH University of Science and Technology, Faculty of Management, vol. 8, pages 21-39.

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