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Multivariate directional tail-weighted dependence measures

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  • Li, Xiaoting
  • Joe, Harry

Abstract

We propose a new family of directional dependence measures for multivariate distributions. The family of dependence measures is indexed by α≥1. When α=1, they measure the strength of dependence along different paths to the joint upper or lower orthant. For α large, they become tail-weighted dependence measures that put more weight in the joint upper or lower tails of the distribution. As α→∞, we show the convergence of the directional dependence measures to the multivariate tail dependence function and characterize the convergence pattern with an asymptotic expansion. This expansion leads to a method to estimate the multivariate tail dependence function using weighted least square regression. We develop rank-based sample estimators for the tail-weighted dependence measures and establish their asymptotic distributions. The practical utility of the tail-weighted dependence measures in multivariate tail inference is further demonstrated through their application to a financial dataset.

Suggested Citation

  • Li, Xiaoting & Joe, Harry, 2024. "Multivariate directional tail-weighted dependence measures," Journal of Multivariate Analysis, Elsevier, vol. 203(C).
    • Handle: RePEc:eee:jmvana:v:203:y:2024:i:c:s0047259x24000265
    DOI: 10.1016/j.jmva.2024.105319
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    References listed on IDEAS

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