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Copula goodness-of-fit testing: an overview and power comparison

Daniel Berg

The European Journal of Finance, 2009, vol. 15, issue 7-8, 675-701

Abstract: Several copula goodness-of-fit approaches are examined, three of which are proposed in this paper. Results are presented from an extensive Monte Carlo study, where we examine the effect of dimension, sample size and strength of dependence on the nominal level and power of the different approaches. While no approach is always the best, some stand out and conclusions and recommendations are made. A novel study of p-value variation due to permutation order, for approaches based on Rosenblatt's transformation is also carried out. Results show significant variation due to permutation order for some of the approaches based on this transform. However, when approaching rejection regions, the additional variation is negligible.

Keywords: copula; cramer-von Mises statistic; empirical copula; goodness-of-fit; parametric bootstrap; pseudo-samples; Rosenblatt's transformation (search for similar items in EconPapers)
Date: 2009
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Handle: RePEc:taf:eurjfi:v:15:y:2009:i:7-8:p:675-701