A Simplified, General Approach to Simulating from Multivariate Copula Functions

Barry Goodwin ()

No 124868, 2012 Annual Meeting, August 12-14, 2012, Seattle, Washington from Agricultural and Applied Economics Association

Abstract: Copulas have become an important analytic tool for characterizing multivariate distributions and dependence. One is often interested in simulating data from copula estimates. The process can be analytically and computationally complex and usually involves steps that are unique to a given parametric copula. We describe an alternative approach that uses \probability{proportional{to{size" (PPS) random sampling with weights formed from the copula likelihood function. The method is flexible and can be applied to parametric and nonparametric marginal density estimates. The precision of the simulation can be calibrated by adjusting the density of the multidimensional grid used in the simulation process. The approach is fully transparent to any copula function with continuous random variables. An example evaluates a number of goodness-of-fit criteria and provides strong support for the validity and practicality of the method.

Keywords: Research; Methods/Statistical; Methods (search for similar items in EconPapers)
Pages: 15
Date: 2012-06-04
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:ags:aaea12:124868

DOI: 10.22004/ag.econ.124868

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