IDEAS home Printed from https://ideas.repec.org/p/cfr/cefirw/w0167.html
   My bibliography  Save this paper

Reconstructing high dimensional dynamic distributions from distributions of lower dimension

Author

Listed:
  • Stanislav Anatolyev

    () (New Economic School)

  • Renat Khabibullin

    () (Barclays Capital)

  • Artem Prokhorov

    () (University of Sydney, CIREQ)

Abstract

We propose a new sequential procedure for estimating a dynamic joint distribution of a group of assets. The procedure is motivated by the theory of composite likelihood and by the theory of copula functions. It recovers m-variate distributions by coupling univariate distributions with distributions of dimension m - 1. This copula-based method produces pseudo-maximum-likelihood type estimators of the distribution of all pairs, triplets, quadruples, etc, of assets in the group. Eventually the joint distribution of unrestricted dimension can be recovered. We show that the resulting density can be viewed as a exible factorization of the underlying true distribution, subject to an approximation error. Therefore, it inherits the well known asymptotic properties of the conventional copula-based pseudo-MLE but offers important advantages. Specifically, the proposed procedure trades the dimensionality of the parameter space for numerous simpler estimations, making it feasible when conventional methods fail in finite samples. Even though there are more optimization problems to solve, each is of a much lower dimension. In addition, the parameterization tends to be much more exible. Using a GARCH-type application from stock returns, we demonstrate how the new procedure provides excellent fit when the dimension is moderate and how it remains operational when the conventional method fails due to high dimensionality.

Suggested Citation

  • Stanislav Anatolyev & Renat Khabibullin & Artem Prokhorov, 2013. "Reconstructing high dimensional dynamic distributions from distributions of lower dimension," Working Papers w0167, Center for Economic and Financial Research (CEFIR).
  • Handle: RePEc:cfr:cefirw:w0167
    as

    Download full text from publisher

    File URL: http://www.cefir.ru/papers/WP167.pdf
    Download Restriction: no

    Other versions of this item:

    References listed on IDEAS

    as
    1. VERBRUGGEN, Aviel & KÉSENNE, Stefan & JEGERS, Marc & CUYVERS, Ludo & HEYNDELS, Bruno & VAN OURTI, Tom & WEVERBERGH, Marcel & ENGELIEN, Peter-Jan & DERIJCKE, Luc & VLOEBERGHS, Daniël, 2002. "Boekbesprekingen: VERBRUGGEN, Aviel: “The skeptical environmentalist (Bjørn LOMBORG, Cambridge University Press, 2001)” (p. 1103-104); KÉSENNE, Stefan: “The economics of art and culture (James HEILBRO," Economic and Social Journal (Economisch en Sociaal Tijdschrift), University of Antwerp, Faculty of Applied Economics, vol. 56(1), pages 103-118, Maart.
    2. Oh, Jeongseog & Noh, Dongsoon & Lee, Eungyeong, 2013. "The effect of CO addition on the flame behavior of a non-premixed oxy-methane jet in a lab-scale furnace," Applied Energy, Elsevier, vol. 112(C), pages 350-357.
    3. Claire Granier & Bertrand Bessagnet & Tami Bond & Ariela D’Angiola & Hugo Denier van der Gon & Gregory Frost & Angelika Heil & Johannes Kaiser & Stefan Kinne & Zbigniew Klimont & Silvia Kloster & Jean, 2011. "Evolution of anthropogenic and biomass burning emissions of air pollutants at global and regional scales during the 1980–2010 period," Climatic Change, Springer, vol. 109(1), pages 163-190, November.
    4. David de la Croix & Pierre Pestieau, 2007. "Réformer le système des retraites belge," Reflets et perspectives de la vie économique, De Boeck Université, vol. 0(1), pages 113-127.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    pseudo-likelihood; composite likelihood; multivariate distribution; copulas;

    JEL classification:

    • C13 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Estimation: General

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    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:cfr:cefirw:w0167. 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: (Julia Babich). General contact details of provider: http://edirc.repec.org/data/cefirru.html .

    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.