The method of simulated quantiles

Yves Dominicy and David Veredas

Journal of Econometrics, 2013, vol. 172, issue 2, 235-247

Abstract: We introduce the Method of Simulated Quantiles, or MSQ, an indirect inference method based on quantile matching that is useful for situations where the density function does not have a closed form and/or moments do not exist. Functions of theoretical quantiles, which depend on the parameters of the assumed probability law, are matched with the sample counterparts, which depend on the observations. Since the theoretical quantiles may not be available analytically, the optimization is based on simulations. We illustrate the method with the estimation of α-stable distributions. A thorough Monte Carlo study and an illustration to 22 financial indexes show the usefulness of MSQ.

Keywords: Quantiles; Simulation; Matching; Inference (search for similar items in EconPapers)
JEL-codes: C32 E44 G14 (search for similar items in EconPapers)
Date: 2013
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (23)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:econom:v:172:y:2013:i:2:p:235-247

DOI: 10.1016/j.jeconom.2012.08.010

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