A General Quantile Function Model for Economic and Financial Time Series

Abstract

This article proposed a general quantile function model that covers both one- and multiple-dimensional models and that takes several existing models in the literature as its special cases. This article also developed a new uniform Bayesian framework for quantile function modelling and illustrated the developed approach through different quantile function models. Many distributions are defined explicitly only via their quanitle functions as the corresponding distribution or density functions do not have an explicit mathematical expression. Such distributions are rarely used in economic and financial modelling in practice. The developed methodology makes it more convenient to use these distributions in analyzing economic and financial data. Empirical applications to economic and financial time series and comparisons with other types of models and methods show that the developed method can be very useful in practice.

Keywords:

• Bayesian approach
• Currency exchange rates
• German DAX
• Quantile functions models

JEL Classification:

• C1
• C11
• C22

ACKNOWLEDGMENT

We would like to express our sincere thanks to the Editor, the Associate Editor, and an anonymous referee for their very thoughtful and constructive comments which have greatly enhanced the quality and the presentation of the article.