Pair Copula Constructions for Multivariate Discrete Data

Anastasios Panagiotelis, Claudia Czado and Harry Joe

Journal of the American Statistical Association, 2012, vol. 107, issue 499, 1063-1072

Abstract: Multivariate discrete response data can be found in diverse fields, including econometrics, finance, biometrics, and psychometrics. Our contribution, through this study, is to introduce a new class of models for multivariate discrete data based on pair copula constructions (PCCs) that has two major advantages. First, by deriving the conditions under which any multivariate discrete distribution can be decomposed as a PCC, we show that discrete PCCs attain highly flexible dependence structures. Second, the computational burden of evaluating the likelihood for an m -dimensional discrete PCC only grows quadratically with m . This compares favorably to existing models for which computing the likelihood either requires the evaluation of 2-super- m terms or slow numerical integration methods. We demonstrate the high quality of inference function for margins and maximum likelihood estimates, both under a simulated setting and for an application to a longitudinal discrete dataset on headache severity. This article has online supplementary material.

Date: 2012
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Citations: View citations in EconPapers (48)

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DOI: 10.1080/01621459.2012.682850

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