Nonparametric C- and D-vine-based quantile regression

Tepegjozova Marija (), Zhou Jing (), Claeskens Gerda () and Czado Claudia ()
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Tepegjozova Marija: Department of Mathematics, Technische Universität München, Boltzmannstraße 3, 85748, Garching, Germany
Zhou Jing: ORStat and Leuven Statistics Research Centre, KU Leuven, Naamsestraat 69-box 3555, Leuven, Belgium
Claeskens Gerda: ORStat and Leuven Statistics Research Centre, KU Leuven, Naamsestraat 69-box 3555, Leuven, Belgium
Czado Claudia: Department of Mathematics and Munich Data Science Institute, Technische Universität München, Boltzmannstraße 3, 85748, Garching, Germany

Dependence Modeling, 2022, vol. 10, issue 1, 1-21

Abstract: Quantile regression is a field with steadily growing importance in statistical modeling. It is a complementary method to linear regression, since computing a range of conditional quantile functions provides more accurate modeling of the stochastic relationship among variables, especially in the tails. We introduce a nonrestrictive and highly flexible nonparametric quantile regression approach based on C- and D-vine copulas. Vine copulas allow for separate modeling of marginal distributions and the dependence structure in the data and can be expressed through a graphical structure consisting of a sequence of linked trees. This way, we obtain a quantile regression model that overcomes typical issues of quantile regression such as quantile crossings or collinearity, the need for transformations and interactions of variables. Our approach incorporates a two-step ahead ordering of variables, by maximizing the conditional log-likelihood of the tree sequence, while taking into account the next two tree levels. We show that the nonparametric conditional quantile estimator is consistent. The performance of the proposed methods is evaluated in both low- and high-dimensional settings using simulated and real-world data. The results support the superior prediction ability of the proposed models.

Keywords: vine copulas; conditional quantile function; nonparametric pair-copulas (search for similar items in EconPapers)
Date: 2022
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Persistent link: https://EconPapers.repec.org/RePEc:vrs:demode:v:10:y:2022:i:1:p:1-21:n:1

DOI: 10.1515/demo-2022-0100

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