Modeling the Dependence Structure of the WIG20 Portfolio Using a Pair-copula Construction
Journal Title: Dynamic Econometric Models - Year 2010, Vol 10, Issue 1
Abstract
Elliptical distributions commonly applied to modeling the returns of stocks in high-dimensional portfolio are not capable of adequate describing the dependence between the components when their statistical properties are very diverse. The MGARCH and standard dynamic copula models are often of little usefulness in such cases. In this paper, we apply a methodology called the pair-copula decomposition to model the joint conditional distribution of the returns on stocks constituting the WIG20 index, and show some advantage of this construction over the approach using the t Student DCC model.
Authors and Affiliations
Ryszard Doman
Keywords
Related Articles
- EP ID EP150535
- DOI -
- Views 69
- Downloads 0
Estimating and Forecasting GDP in Poland with Dynamic Factor Model
Presented paper concerns the dynamic factor models theory and application in the econometric analysis of GDP in Poland. DFMs are used for construction of the economic indicators and in forecasting, in analyses of the mon...
The Term Structure of the Polish Interbank Rates. A Note on the Symmetry of their Reversion to the Mean
The empirical analysis of the term structure of the Polish interbank rates has revealed that the short and the long rates from the whole spectrum of maturities have evolved almost accordingly to the expectations hypothes...
Choosing a Model and Strategy of Model Selection by Accumulated Prediction Error
The purpose of the paper is to present and apply the accumulative one-step-ahead prediction error (APE) not only as a method (strategy) of model selection, but also as a tool of model selection strategy (meta-selection)....
Detection of Collusion Equilibrium in an Industry with Application of Wavelet Analysis
In the present paper an attempt was made to verify the possibilities of the use of a marker of structural changes of market price variance in the detection of trade collusion between business players. We used the theoret...
ARCH Effect in Classical Market-Timing Models with Lagged Market Variable: the Case of Polish Market
The main goal of this study is to present the regressions of the GARCH versions of classical market-timing models of Polish equity funds. We examine the models with lagged values of the market factor as an additional var...