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Copulas in Econometrics

Author

Listed:
  • Yanqin Fan

    (Department of Economics, University of Washington, Seattle, Washington 98195)

  • Andrew J. Patton

    (Department of Economics, Duke University, Durham, North Carolina 27708-0097)

Abstract

Copulas are functions that describe the dependence between two or more random variables. This article provides a brief review of copula theory and two areas of economics in which copulas have played important roles: multivariate modeling and partial identification of parameters that depend on the joint distribution of two random variables with fixed or known marginal distributions. We focus on bivariate copulas but provide references on recent advances in constructing higher-dimensional copulas.

Suggested Citation

  • Yanqin Fan & Andrew J. Patton, 2014. "Copulas in Econometrics," Annual Review of Economics, Annual Reviews, vol. 6(1), pages 179-200, August.
    • Handle: RePEc:anr:reveco:v:6:y:2014:p:179-200
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    File URL: http://www.annualreviews.org/doi/abs/10.1146/annurev-economics-080213-041221
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    More about this item

    Keywords

    Sklar’s theorem; multivariate models; Fréchet-Hoeffding inequality; bounds;
    All these keywords.

    JEL classification:

    • C31 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models; Quantile Regressions; Social Interaction Models
    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation

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