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Comparison of estimators for pair-copula constructions

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  • Hobæk Haff, Ingrid

Abstract

We compare two of the most used estimators for the parameters of a pair-copula construction (PCC), namely the semiparametric (SP) and the stepwise semiparametric (SSP) estimators. By construction, the computational speed of the SSP estimator is considerably higher, at the expense of its asymptotic efficiency. Based on an extensive simulation study, we find that the performance of the SSP estimator is overall satisfactory compared to its contender. SSP loses some efficiency with respect to SP with increasing dependence, especially in the top levels of the PCC. On the other hand, the SSP estimator may suffer less under reduced sample sizes and misspecification of the model. Finally, it is the only real alternative for large-dimensional problems. Though it struggles with the top level parameters, the lower order dependences of the resulting estimated PCC mimic the true distribution well. All in all, this study supports the use of SSP in most applications.

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  • Hobæk Haff, Ingrid, 2012. "Comparison of estimators for pair-copula constructions," Journal of Multivariate Analysis, Elsevier, vol. 110(C), pages 91-105.
    • Handle: RePEc:eee:jmvana:v:110:y:2012:i:c:p:91-105
    DOI: 10.1016/j.jmva.2011.08.013
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    Cited by:

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    3. Wang, Shuang & Jia, Haiying & Lu, Jing & Yang, Dong, 2023. "Crude oil transportation route choices: A connectivity reliability-based approach," Reliability Engineering and System Safety, Elsevier, vol. 235(C).
    4. Hobæk Haff, Ingrid & Aas, Kjersti & Frigessi, Arnoldo & Lacal, Virginia, 2016. "Structure learning in Bayesian Networks using regular vines," Computational Statistics & Data Analysis, Elsevier, vol. 101(C), pages 186-208.
    5. Kaveh Salehzadeh Nobari, 2021. "Pair copula constructions of point-optimal sign-based tests for predictive linear and nonlinear regressions," Papers 2111.04919, arXiv.org.
    6. Brechmann Eike Christain & Czado Claudia, 2013. "Risk management with high-dimensional vine copulas: An analysis of the Euro Stoxx 50," Statistics & Risk Modeling, De Gruyter, vol. 30(4), pages 307-342, December.
    7. Bax, Karoline & Sahin, Özge & Czado, Claudia & Paterlini, Sandra, 2023. "ESG, risk, and (tail) dependence," International Review of Financial Analysis, Elsevier, vol. 87(C).
    8. Brendan K. Beare & Juwon Seo, 2015. "Vine Copula Specifications for Stationary Multivariate Markov Chains," Journal of Time Series Analysis, Wiley Blackwell, vol. 36(2), pages 228-246, March.
    9. Kjersti Aas, 2016. "Pair-Copula Constructions for Financial Applications: A Review," Econometrics, MDPI, vol. 4(4), pages 1-15, October.
    10. Karoline Bax & Ozge Sahin & Claudia Czado & Sandra Paterlini, 2021. "ESG, Risk, and (Tail) Dependence," Papers 2105.07248, arXiv.org, revised Nov 2021.
    11. Acar, Elif F. & Genest, Christian & Nešlehová, Johanna, 2012. "Beyond simplified pair-copula constructions," Journal of Multivariate Analysis, Elsevier, vol. 110(C), pages 74-90.
    12. Oliver Grothe & Stephan Nicklas, 2012. "Vine Constructions of Levy Copulas," Papers 1207.4309, arXiv.org, revised Sep 2012.

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