Estimating the Error Distribution in the Multivariate Heteroscedastic Time Series Models
A semiparametric method is studied for estimating the dependence parameter and the joint distribution of the error term in a class of multivariate time series models when the marginal distributions of the errors are unknown. This method is a natural extension of Genest et al. (1995a) for independent and identically distributed observations. The proposed method first obtains √n-consistent estimates of the parameters of each univariate marginal time-series, and computes the corresponding residuals. These are then used to estimate the joint distribution of the multivariate error terms, which is specified using a copula. Our developments and proofs make use of, and build upon, recent elegant results of Koul and Ling (2006) and Koul (2002) for these models. The rigorous proofs provided here also lay the foundation and collect together the technical arguments that would be useful for other potential extensions of this semiparametric approach. It is shown that the proposed estimator of the dependence parameter of the multivariate error term is asymptotically normal, and a consistent estimator of its large sample variance is also given so that confidence intervals may be constructed. A large scale simulation study was carried out to compare the estimators particularly when the error distributions are unknown, which is almost always the case in practice. In this simulation study, our proposed semiparametric method performed better than the well-known parametric methods. An example on exchange rates is used to illustrate the method.
|Date of creation:||Jun 2007|
|Contact details of provider:|| Postal: PO Box 11E, Monash University, Victoria 3800, Australia|
Phone: +61 3 99052489
Fax: +61 3 99055474
Web page: http://business.monash.edu/econometrics-and-business-statistics
More information through EDIRC
|Order Information:|| Web: http://business.monash.edu/econometrics-and-business-statistics Email: |
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.:
- Chen, Xiaohong & Fan, Yanqin, 2006. "Estimation and model selection of semiparametric copula-based multivariate dynamic models under copula misspecification," Journal of Econometrics, Elsevier, vol. 135(1-2), pages 125-154.
- Weijing Wang, 2003. "Estimating the association parameter for copula models under dependent censoring," Journal of the Royal Statistical Society Series B, Royal Statistical Society, vol. 65(1), pages 257-273.
- David Oakes, 2003. "Copula model generated by Dabrowska's association measure," Biometrika, Biometrika Trust, vol. 90(2), pages 478-481, June.
- Kim, Gunky & Silvapulle, Mervyn J. & Silvapulle, Paramsothy, 2007. "Comparison of semiparametric and parametric methods for estimating copulas," Computational Statistics & Data Analysis, Elsevier, vol. 51(6), pages 2836-2850, March.
- Andrew J. Patton, 2006.
"Modelling Asymmetric Exchange Rate Dependence,"
International Economic Review,
Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 47(2), pages 527-556, 05.
- Andrew Patton, 2004. "Modelling Asymmetric Exchange Rate Dependence," Working Papers wp04-04, Warwick Business School, Finance Group.
- Markus Junker & Angelika May, 2005. "Measurement of aggregate risk with copulas," Econometrics Journal, Royal Economic Society, vol. 8(3), pages 428-454, December. Full references (including those not matched with items on IDEAS)