IDEAS home Printed from
   My bibliography  Save this paper

Goodness-of-fit test for copulas


  • Panchenko, V.

    () (Universiteit van Amsterdam)


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.

Suggested Citation

  • Panchenko, V., 2004. "Goodness-of-fit test for copulas," CeNDEF Working Papers 04-16, Universiteit van Amsterdam, Center for Nonlinear Dynamics in Economics and Finance.
  • Handle: RePEc:ams:ndfwpp:04-16

    Download full text from publisher

    File URL:
    Download Restriction: no

    Other versions of this item:

    References listed on IDEAS

    1. Y. Malevergne & D. Sornette, 2003. "Testing the Gaussian copula hypothesis for financial assets dependences," Quantitative Finance, Taylor & Francis Journals, vol. 3(4), pages 231-250.
    2. 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, September.
    3. Bouye, Eric & Durlleman, Valdo & Nikeghbali, Ashkan & Riboulet, Gaël & Roncalli, Thierry, 2000. "Copulas for finance," MPRA Paper 37359, University Library of Munich, Germany.
    4. Mark B. Wise & Vineer Bhansali, 2002. "Implications of Correlated Default For Portfolio Allocation To Corporate Bonds," Papers nlin/0209010,
    5. 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.
    Full references (including those not matched with items on IDEAS)


    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.

    Cited by:

    1. Fernandez, Viviana, 2008. "Copula-based measures of dependence structure in assets returns," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 387(14), pages 3615-3628.
    2. Wanling Huang & Artem Prokhorov, 2014. "A Goodness-of-fit Test for Copulas," Econometric Reviews, Taylor & Francis Journals, vol. 33(7), pages 751-771, October.
    3. Denecke, Liesa & Müller, Christine H., 2011. "Robust estimators and tests for bivariate copulas based on likelihood depth," Computational Statistics & Data Analysis, Elsevier, vol. 55(9), pages 2724-2738, September.
    4. repec:eee:reensy:v:105:y:2012:i:c:p:64-72 is not listed on IDEAS
    5. Zhang, Shulin & Okhrin, Ostap & Zhou, Qian M. & Song, Peter X.-K., 2016. "Goodness-of-fit test for specification of semiparametric copula dependence models," Journal of Econometrics, Elsevier, vol. 193(1), pages 215-233.
    6. Steffen Grønneberg & Nils Lid Hjort, 2014. "The Copula Information Criteria," Scandinavian Journal of Statistics, Danish Society for Theoretical Statistics;Finnish Statistical Society;Norwegian Statistical Association;Swedish Statistical Association, vol. 41(2), pages 436-459, June.
    7. Claudia Klüppelberg & Gabriel Kuhn, 2009. "Copula structure analysis," Journal of the Royal Statistical Society Series B, Royal Statistical Society, vol. 71(3), pages 737-753.
    8. Jean-David Fermanian, 2012. "An overview of the goodness-of-fit test problem for copulas," Papers 1211.4416,
    9. Kallenberg, Wilbert C.M., 2008. "Modelling dependence," Insurance: Mathematics and Economics, Elsevier, vol. 42(1), pages 127-146, February.
    10. Fantazzini, Dean, 2011. "Analysis of multidimensional probability distributions with copula functions. III," Applied Econometrics, Publishing House "SINERGIA PRESS", vol. 24(4), pages 100-130.
    11. Diks, Cees & Panchenko, Valentyn & van Dijk, Dick, 2010. "Out-of-sample comparison of copula specifications in multivariate density forecasts," Journal of Economic Dynamics and Control, Elsevier, vol. 34(9), pages 1596-1609, September.
    12. Kallenberg, Wilbert C.M., 2009. "Estimating copula densities, using model selection techniques," Insurance: Mathematics and Economics, Elsevier, vol. 45(2), pages 209-223, October.
    13. Genest, Christian & Rémillard, Bruno & Beaudoin, David, 2009. "Goodness-of-fit tests for copulas: A review and a power study," Insurance: Mathematics and Economics, Elsevier, vol. 44(2), pages 199-213, April.
    14. repec:eee:reensy:v:132:y:2014:i:c:p:72-82 is not listed on IDEAS
    15. Wang, Zong-Run & Chen, Xiao-Hong & Jin, Yan-Bo & Zhou, Yan-Ju, 2010. "Estimating risk of foreign exchange portfolio: Using VaR and CVaR based on GARCH–EVT-Copula model," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 389(21), pages 4918-4928.
    16. Zhu, Hui-Ming & Li, Rong & Li, Sufang, 2014. "Modelling dynamic dependence between crude oil prices and Asia-Pacific stock market returns," International Review of Economics & Finance, Elsevier, vol. 29(C), pages 208-223.
    17. Shulin Zhang, & Ostap Okhrin, & Qian M. Zhou & Peter X.-K. Song, 2013. "Goodness-of-fit Test for Specification of Semiparametric Copula Dependence Models," SFB 649 Discussion Papers SFB649DP2013-041, Sonderforschungsbereich 649, Humboldt University, Berlin, Germany.
    18. Muteba Mwamba, John & Mokwena, Paula, 2013. "International diversification and dependence structure of equity portfolios during market crashes: the Archimedean copula approach," MPRA Paper 64384, University Library of Munich, Germany.
    19. Marc Gronwald & Janina Ketterer & Stefan Trück, 2011. "The Dependence Structure between Carbon Emission Allowances and Financial Markets - A Copula Analysis," CESifo Working Paper Series 3418, CESifo Group Munich.

    More about this item


    Access and download statistics


    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. 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). General contact details of provider: .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.