Goodness-of-fit test for copulas
Copulas are often used in finance to characterize the dependence between assets. However, a choice of the functional form for the copula is an open question in the literature. This paper develops a goodness-of-fit test for copulas based on positive definite bilinear forms. The suggested test avoids the use of plug-in estimators that is the common practice in the literature. The test statistics can be consistently computed on the basis of V-estimators even in the case of large dimensions. The test is applied to a dataset of US large cap stocks to assess the performance of the Gaussian copula for the portfolios of assets of various dimension. The Gaussian copula appears to be inadequate to characterize the dependence between assets.
|Date of creation:||2004|
|Date of revision:|
|Contact details of provider:|| Postal: |
Phone: + 31 20 525 52 58
Fax: + 31 20 525 52 83
Web page: http://www.fee.uva.nl/cendef/
More information through EDIRC
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- C. W. Granger & E. Maasoumi & J. Racine, 2004. "A Dependence Metric for Possibly Nonlinear Processes," Journal of Time Series Analysis, Wiley Blackwell, vol. 25(5), pages 649-669, 09.
- Y. Malevergne & D. Sornette, 2003.
"Testing the Gaussian copula hypothesis for financial assets dependences,"
Taylor & Francis Journals, vol. 3(4), pages 231-250.
- Y. Malevergne & D. Sornette, 2001. "Testing the Gaussian Copula Hypothesis for Financial Assets Dependences," Finance 0111003, EconWPA.
- Yannick Malevergne & Didier Sornette, 2003. "Testing the Gaussian copula hypothesis for financial assets dependences," Post-Print hal-00520539, HAL.
- Y. Malevergne & D. Sornette, 2001. "Testing the Gaussian Copula Hypothesis for Financial Assets Dependences," Papers cond-mat/0111310, arXiv.org.
- Mark B. Wise & Vineer Bhansali, 2002. "Implications of Correlated Default For Portfolio Allocation To Corporate Bonds," Papers nlin/0209010, arXiv.org.
- Yanqin Fan & Xiaohong Chen & Andrew Patton, 2004. "(IAM Series No 003) Simple Tests for Models of Dependence Between Multiple Financial Time Series, with Applications to U.S. Equity Returns and Exchange Rates," FMG Discussion Papers dp483, Financial Markets Group.
- Bouye, Eric & Durlleman, Valdo & Nikeghbali, Ashkan & Riboulet, Gaël & Roncalli, Thierry, 2000. "Copulas for finance," MPRA Paper 37359, University Library of Munich, Germany.
When requesting a correction, please mention this item's handle: RePEc:ams:ndfwpp:04-16. See general 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: (Cees C.G. Diks)
If references are entirely missing, you can add them using this form.