Multivariate Return Decomposition: Theory and Implications
Stanislav Anatolyev () and
Nikolay Gospodinov ()
Econometric Reviews, 2019, vol. 38, issue 5, 487-508
In this paper, we propose aÂ model based on multivariate decomposition of multiplicative â€“ absolute values and signs â€“ components of asset returns. In the m-variate case, the marginals for the m absolute values and the binary marginals for the m directions are linked through a 2m-dimensional copula. The approach is detailed in the case of a bivariate decomposition. We outline the construction of the likelihood function and the computation of different conditional measures. The finite-sample properties of the maximum likelihood estimator are assessed by simulation. An application to predicting bond returns illustrates the usefulness of the proposed method.
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Working Paper: Multivariate return decomposition: theory and implications (2015)
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Persistent link: https://EconPapers.repec.org/RePEc:taf:emetrv:v:38:y:2019:i:5:p:487-508
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