Estimating dynamic copula dependence using intraday data

Lidan Grossmass and Ser-Huang Poon

Studies in Nonlinear Dynamics & Econometrics, 2015, vol. 19, issue 4, 501-529

Abstract: We estimate the dynamic daily dependence between assets by applying the Semiparametric Copula-Based Multivariate Dynamic (SCOMDY) model on intraday data. Using tick data of three stock returns of the period before and during the credit crisis, we find that our dependence estimator better captures the steep increase in dependence during the onset of the crisis as compared to other commonly used time-varying copula methods. Like other high-frequency estimators, we find that the dependence estimator exhibits long memory and forecast it using a HAR model. We show that for out-of-sample forecasts, our dependence estimator performs better than the constant estimator and other commonly used time-varying copula dependence estimators.

Keywords: copula; high frequency data; intraday dependence; time-varying dependence; value-at-risk (search for similar items in EconPapers)
JEL-codes: C14 C18 C58 G17 (search for similar items in EconPapers)
Date: 2015
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Citations: View citations in EconPapers (3)

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DOI: 10.1515/snde-2013-0123

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