How to Compare Copula Forecasts?

Tobias Fissler and Yannick Hoga

Papers from arXiv.org

Abstract: This paper lays out a principled approach to compare copula forecasts via strictly consistent scores. We first establish the negative result that, in general, copulas fail to be elicitable, implying that copula predictions cannot sensibly be compared on their own. A notable exception is on Fr\'echet classes, that is, when the marginal distribution structure is given and fixed, in which case we give suitable scores for the copula forecast comparison. As a remedy for the general non-elicitability of copulas, we establish novel multi-objective scores for copula forecast along with marginal forecasts. They give rise to two-step tests of equal or superior predictive ability which admit attribution of the forecast ranking to the accuracy of the copulas or the marginals. Simulations show that our two-step tests work well in terms of size and power. We illustrate our new methodology via an empirical example using copula forecasts for international stock market indices.

Date: 2024-10
New Economics Papers: this item is included in nep-ecm
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://arxiv.org/pdf/2410.04165 Latest version (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:arx:papers:2410.04165

Access Statistics for this paper

More papers in Papers from arXiv.org
Bibliographic data for series maintained by arXiv administrators ().