MODELING HIGH DIMENSIONAL ASSET PRICING RETURNS USING A DYNAMIC SKEWED COPULA MODEL

Authors

Yuting Gong, Shanghai University, ChinaFollow
Jufang Liang, Hunan University, ChinaFollow
Jie Zhu, Shanghai University, ChinaFollow

Document Type

Article

Abstract

We propose a dynamic skewed copula to model multivariate dependence in asset returns in a flexible yet parsimonious way. We then apply the model to 50 exchangetraded funds. The new copula is shown to have better in-sample and out-of-sample performance than existing copulas. In particular, the dynamic model is able to capture increasing dependence patterns during financial crisis periods. It is crucial for investors to take dynamic dependence structure into account when modeling high dimensional returns

Recommended Citation

Gong, Yuting; Liang, Jufang; and Zhu, Jie (2019) "MODELING HIGH DIMENSIONAL ASSET PRICING RETURNS USING A DYNAMIC SKEWED COPULA MODEL," Bulletin of Monetary Economics and Banking: Vol. 22: No. 1, Article 1.
DOI: https://doi.org/10.21098/bemp.v22i1.1044
Available at: https://bulletin.bmeb-bi.org/bmeb/vol22/iss1/1

First Page

1

Last Page

28

Creative Commons License

This work is licensed under a Creative Commons Attribution-NonCommercial 4.0 International License

Country

China

Affiliation

Shanghai University