Common Factors in Conditional Distributions
Dominant properties of various kinds can be defined for distributions including trends, strong seasonality, business cycles, and a persistent component. We say that in the joint distribution of X and Y, conditional on W has a common factor if W is a dominant component, but it does not appear in the copula, only in the conditional marginal distributions for X and Y. An application is discussed involving national income and consumption and a business cycle indicator. The results suggest that the marginals vary with the business cycle but not the copula.
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- Patton, Andrew J, 2001. "Modelling Time-Varying Exchange Rate Dependence Using the Conditional Copula," University of California at San Diego, Economics Working Paper Series qt01q7j1s2, Department of Economics, UC San Diego.
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Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 35(3), pages 705-30, August.
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- Tom Doan, . "RATS programs to replicate Hansen's GARCH models with time-varying t-densities," Statistical Software Components RTZ00086, Boston College Department of Economics.
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