A new graphical tool for copula selection
The selection of copulas is an important aspect of dependence modeling. In many practical applications, only a limited number of copulas is tested, and the modeling applications usually are restricted to the bivariate case. One explanation is the fact that no graphical copula tool exist which allows to assess the goodness-of-fit of a large set of (possible higher dimensional) copula functions at once. This paper pursues to overcome this problem by developing a new graphical tool for the copula selection, based on a statistical analysis technique called ‘principal coordinate analysis’. The advantage is threefold. In the first place, when projecting the empirical copula of a modeling application on a two-dimensional copula space, it allows us to visualize the fit of a whole collection of multivariate copulas at once. Secondly, the visual tool allows to identify ‘search’ directions for potential fit improvements (e.g. through the use of copula transforms). Finally, in the bivariate case the tool makes it also possible to give a two-dimensional visual overview of a large number of known copula families, for a common concordance value, leading to a better understanding and a more efficient use of the different copula families. The practical use of the new graphical tool is illustrated for two two-dimensional and two three-dimensional fitting applications.
|Date of creation:||May 2010|
|Contact details of provider:|| Postal: Prinsstraat 13, B-2000 Antwerpen|
Web page: https://www.uantwerp.be/en/faculties/applied-economic-sciences/
More information through EDIRC
When requesting a correction, please mention this item's handle: RePEc:ant:wpaper:2010004. 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: (Joeri Nys)
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 references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link 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 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.