Goodness-of-fit test for copulas

Panchenko, Valentyn

Goodness-of-fit test for copulas

Physica A: Statistical Mechanics and its Applications, 2005, vol. 355, issue 1, 176-182

Abstract: Copulas are often used in finance to characterize the dependence between assets. However, a choice of the functional form for the copula is an open question in the literature. This paper develops a goodness-of-fit test for copulas based on positive definite bilinear forms. The suggested test avoids the use of plug-in estimators that is the common practice in the literature. The test statistics can be consistently computed on the basis of V-estimators even in the case of large dimensions. The test is applied to a dataset of US large cap stocks to assess the performance of the Gaussian copula for the portfolios of assets of various dimension. The Gaussian copula appears to be inadequate to characterize the dependence between assets.

Keywords: Copula; Correlation; Goodness-of-fit; Multivariate time series; Nonparametric statistics; V-statistics; Bootstrap (search for similar items in EconPapers)
Date: 2005
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Citations: View citations in EconPapers (26)

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Working Paper: Goodness-of-fit test for copulas (2004)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:phsmap:v:355:y:2005:i:1:p:176-182

DOI: 10.1016/j.physa.2005.02.081

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