434
Views
3
CrossRef citations to date
0
Altmetric
Articles

Score-driven copula models for portfolios of two risky assets

&
Pages 1861-1884 | Received 25 Sep 2017, Accepted 03 Apr 2018, Published online: 17 May 2018

References

  • Ang, Andrew, and Geert Bekaert. 2002. “International Asset Allocation with Regime Shifts.” The Review of Financial Studies 15 (4): 1137–1187. doi: 10.1093/rfs/15.4.1137
  • Ang, Andrew, and Joseph Chen. 2002. “Asymmetric Correlations of Equity Portfolios.” Journal of Financial Economics 63 (3): 443–494. doi: 10.1016/S0304-405X(02)00068-5
  • Avdulaj, Kernar, and Jozef Barunik. 2013. “Can We Still Benefit from International Diversification? The Case of the Czech and German Stock Markets.” Czech Journal of Economics and Finance 63 (5): 425–442.
  • Avdulaj, Kernar, and Jozef Barunik. 2015. “Are Benefits from Oil-Stocks Diversification Gone? New Evidence from a Dynamic Copula and High Frequency Data.” Energy Economics 51: 31–44. doi: 10.1016/j.eneco.2015.05.018
  • Azam, Kazim, and Andre Lucas. 2015. “Mixed Density Based Copula Likelihood.” Tinbergen Institute Discussion Paper, TI 15-003/IV/DSF084, Amsterdam.
  • Bae, Kee-Hong, Andrew G. Karolyi, and Reneé M. Stulz. 2003. “A New Approach to Measuring Financial Contagion.” The Review of Financial Studies 16 (3): 717–763. doi: 10.1093/rfs/hhg012
  • Basel Committee. 1996. “Supervisory Framework for the Use of “Backtesting” in Conjunction with the Internal Models Approach to Market Risk Capital Requirements.” www.bis.org.
  • Black, Fischer. 1976. “Studies of Stock Price Volatility Changes.” Proceedings of the 1976 Meetings of the American Statistical Association, Washington, DC, 171–181.
  • Bollerslev, Tim. 1986. “Generalized Autoregressive Conditional Heteroskedasticity.” Journal of Econometrics 31 (3): 307–327. doi: 10.1016/0304-4076(86)90063-1
  • Boudt, Kris, Jon Danielsson, Siem Jan Koopman, and Andre Lucas. 2012. “Regime Switches in the Volatility and Correlation of Financial Institutions.” National Bank of Belgium Working Paper Series, No 227, Brussels.
  • Box, George E. P., and Gwilym M. Jenkins. 1970. Time Series Analysis, Forecasting and Control. San Francisco: Holden-Day.
  • Campbell, Rachel, Kees Koedijk, and Paul Kofman. 2002. “Increased Correlation in Bear Markets.” Financial Analysts Journal 58 (1): 87–94. doi: 10.2469/faj.v58.n1.2512
  • Canela, Miguel-Angel, and Eduardo Pedreira. 2012. “Modelling Dependence in Latin American Markets Using Copula Functions.” Journal of Emerging Market Finance 11 (3): 231–270. doi: 10.1177/0972652712466493
  • Christofferssen, Peter. 1998. “Evaluating Interval Forecasts.” International Economic Review 39 (4): 841–862. doi: 10.2307/2527341
  • Christoffersen, Peter, Vihang Errunza, Kris Jacobs, and Xisong Jin. 2014. “Correlation Dynamics and International Diversification Benefits.” International Journal of Forecasting 30 (3): 807–824. doi: 10.1016/j.ijforecast.2014.01.001
  • Chua, David B., Mark Kritzman, and Sébastien Page. 2011. “The Myth of Diversification.” Journal of Portfolio Management 36 (1): 26–35. doi: 10.3905/JPM.2009.36.1.026
  • Creal, Drew, Siem Jan Koopman, and Andre Lucas. 2013. “Generalized Autoregressive Score Models with Applications.” Journal of Applied Econometrics 28 (5): 777–795. doi: 10.1002/jae.1279
  • Davidson, Russell, and James G. MacKinnon. 2003. Econometric Theory and Methods. New York: Oxford University Press.
  • De Lira Salvatierra, Irving, and Andrew J. Patton. 2015. “Dynamic Copula Models and High Frequency Data.” Journal of Empirical Finance 30: 120–135. doi: 10.1016/j.jempfin.2014.11.008
  • De Miguel, Victor, Lorenzo Garlappi, and Raman Uppal. 2009. “Optimal versus Naive Diversification: How Inefficient Is the 1/N Portfolio Strategy?.” Review of Financial Studies 22 (5): 1915–1953. doi: 10.1093/rfs/hhm075
  • De Miguel, Victor, and Francisco J. Nogales. 2009. “Portfolio Selection with Robust Estimation.” Operations Research 57 (3): 560–577. doi: 10.1287/opre.1080.0566
  • Engle, Robert. 2002. “Dynamic Conditional Correlation: A Simple Class of Multivariate Generalized Autoregressive Conditional Heteroskedasticity Models.” Journal of Business & Economic Statistics 20 (3): 339–351. doi: 10.1198/073500102288618487
  • Erb, Claude B., Campbell R. Harvey, and Tadas E. Viskanta. 1994. “Forecasting International Equity Correlations.” Financial Analysts Journal 50 (6): 32–45. doi: 10.2469/faj.v50.n6.32
  • Glosten, Lawrence R., Ravi Jagannathan, and David E. Runkle. 1993. “On the Relation between the Expected Value and the Volatility of the Nominal Excess Return on Stocks.” The Journal of Finance 48 (5): 1779–1801. doi: 10.1111/j.1540-6261.1993.tb05128.x
  • Grégoire, Vincent, Christian Genest, and Michel Gendron. 2008. “Using Copulas to Model Price Dependence in Energy Markets.” Energy Risk 5: 58–64.
  • Hafner, Christian M., and Hans Manner. 2012. “Dynamic Stochastic Copula Models: Estimation, Inference and Applications.” Journal of Applied Econometrics 27 (2): 269–295. doi: 10.1002/jae.1197
  • Hamilton, James D. 1994. Time Series Analysis. Princeton: Princeton University Press.
  • Harvey, Andrew C. 2010. “Tracking a Changing Copula.” Journal of Empirical Finance 17 (3): 485–500. doi: 10.1016/j.jempfin.2009.10.004
  • Harvey, Andrew C. 2013. Dynamic Models for Volatility and Heavy Tails. Cambridge: Cambridge Books, Cambridge University Press.
  • Harvey, Andrew C., and Tirthankar Chakravarty. 2008. “Beta-t-(E)GARCH.” Cambridge Working Papers in Economics 0840, Faculty of Economics, University of Cambridge, Cambridge.
  • Harvey, Andrew C., and Genaro Sucarrat. 2014. “EGARCH Models with Fat Tails, Skewness and Leverage.” Computational Statistics & Data Analysis 76, Part B: 320–338. doi: 10.1016/j.csda.2013.09.022
  • Harvey, Andrew C., and Stephen Thiele. 2016. “Testing against Changing Correlation.” Journal of Empirical Finance 38: 575–589. doi: 10.1016/j.jempfin.2015.09.003
  • Humphrey, Jacquelyn E., Karen L. Benson, RandK. Y. Low, and Wei-Lun Lee. 2015. “Is Diversification Always Optimal?.” Pacific Basin Finance Journal 35, Part B: 521–532. doi: 10.1016/j.pacfin.2015.09.003
  • Janus, Pawel, Siem Jan Koopman, and Andre Lucas. 2014. “Long Memory Dynamics for Multivariate Dependence under Heavy Tails.” Journal of Empirical Finance 29, Part C: 187–206. doi: 10.1016/j.jempfin.2014.09.007
  • Joe, Harry. 2015. Dependence Modeling with Copulas. Boca Raton, FL: CRC Press, Taylor & Francis Group.
  • Jondeau, Eric, and Michael Rockinger. 2006. “The Copula-GARCH Model of Conditional Dependencies: An International Stock Market Application.” Journal of International Money and Finance 25 (5): 827–853. doi: 10.1016/j.jimonfin.2006.04.007
  • Jorion, Philippe. 2006. Value at Risk: The New Benchmark for Managing Financial Risk. 3rd ed. New York: McGraw-Hill.
  • Koopman, Siem Jan, Rutger Lit, and Andre Lucas. 2015. “Intraday Stock Price Dependence Using Dynamic Discrete Copula Distributions.” Tinbergen Institute Discussion Paper, TI 15-037/III/DSF90, Amsterdam.
  • Koopman, Siem Jan, Andre Lucas, and Marcel Scharth. 2016. “Predicting Time-Varying Parameters with Parameter-Driven and Observation-Driven Models.” The Review of Economics and Statistics 98 (1): 97–110. doi: 10.1162/REST_a_00533
  • Kritzman, Mark. 2011. “The Graceful Aging of Mean-Variance Optimization.” Journal of Portfolio Management 37 (2): 3–5. doi: 10.3905/jpm.2011.37.2.003
  • Kritzman, Mark, Sébastien Page, and David Turkington. 2010. “In Defense of Optimization: The Fallacy of 1/N.” Financial Analysts Journal 66 (2): 31–39. doi: 10.2469/faj.v66.n2.6
  • Kupiec, Paul H. 1995. “Techniques for Verifying the Accuracy of Risk Measurement Models.” The Journal of Derivatives 3 (2): 73–84. doi: 10.3905/jod.1995.407942
  • Ljung, Greta M., and George E. P. Box. 1978. “On a Measure of Lack of Fit in Time-Series Models.” Biometrika 65 (2): 297–303. doi: 10.1093/biomet/65.2.297
  • Longin, François, and Bruno Solnik. 2001. “Extreme Correlation of International Equity Markets.” The Journal of Finance 56 (2): 649–676. doi: 10.1111/0022-1082.00340
  • Low, Rand Kwong Yew. 2017. “Vine Copulas: Modeling Systemic Risk and Enhancing Higher-Moment Portfolio Optimization.” Accounting & Finance. https://doi.org/10.1111/acfi.12274
  • Low, Rand Kwong Yew, Jamie Alcock, Robert Faff, and Timothy Brailsford. 2013. “Canonical Vine Copulas in the Context of Modern Portfolio Management: Are They Worth It?.” Journal of Banking & Finance 37 (8): 3085–3099. doi: 10.1016/j.jbankfin.2013.02.036
  • Low, Rand Kwong Yew, Robert Faff, and Kjersti Aas. 2016. “Enhancing Mean-variance Portfolio Selection by Modeling Distributional Asymmetries.” Journal of Economics and Business 85, Part C: 49–72. doi: 10.1016/j.jeconbus.2016.01.003
  • Newey, Whitney K., and Kenneth D. West. 1987. “A Simple, Positive Semi-Definite, Heteroskedasticity and Autocorrelation Consistent Covariance Matrix.” Econometrica 55 (3): 703–708. doi: 10.2307/1913610
  • Oh, Dong Hwan, and Andrew J. Patton. 2016. “High-Dimensional Copula-Based Distributions with Mixed Frequency Data.” Journal of Econometrics 193 (2): 349–366. doi: 10.1016/j.jeconom.2016.04.011
  • Oh, Dong Hwan, and Andrew J. Patton. 2018. “Time-Varying Systemic Risk: Evidence from a Dynamic Copula Model of CDS Spreads.” Journal of Business & Economic Statistics 36 (2): 181–195. doi: 10.1080/07350015.2016.1177535
  • Oh, Dong Hwan, and Andrew J. Patton. 2017. “Modelling Dependence in High Dimensions with Factor Copulas.” Journal of Business & Economic Statistics 35 (1): 139–154. doi: 10.1080/07350015.2015.1062384
  • Patton, Andrew J. 2004. “On the Out-of-Sample Importance of Skewness and Asymmetric Dependence for Asset Allocation.” Journal of Financial Econometrics 2 (1): 130–168. doi: 10.1093/jjfinec/nbh006
  • Patton, Andrew J. 2006. “Modelling Asymmetric Exchange Rate Dependence.” International Economic Review 47 (2): 527–556. doi: 10.1111/j.1468-2354.2006.00387.x
  • Patton, Andrew J. 2009. “Are “Market Neutral” Hedge Funds Really Market Neutral?.” The Review of Financial Studies 22 (7): 2495–2530. doi: 10.1093/rfs/hhn113
  • Rad, Hossein, Rand Kwong Yew Low, and Robert Faff. 2016. “The Profitability of Pairs Trading Strategies: Distance, Cointegration and Copula Methods.” Quantitative Finance 16 (10): 1541–1558. doi: 10.1080/14697688.2016.1164337
  • Russell, Jeffrey R., and Robert F. Engle. 2005. “A Discrete-State Continuous-Time Model of Financial Transaction Prices and Times: The Autoregressive Conditional Multinomial-Autoregressive Conditional Duration Model.” Journal of Business & Economic Statistics 23 (2): 166–180. doi: 10.1198/073500104000000541
  • Sucarrat, Genaro, and Steffen Grønneberg. 2016. “Models of Financial Return with Time-Varying Zero Probability.” MPRA Working Paper No. 68931, Munich.
  • Taylor, Stephen J. 1986. Modelling Financial Time Series. Chichester: Wiley.
  • Tu, Jun, and Guofu Zhou. 2011. “Markowitz Meets Talmud: A Combination of Sophisticated and Naive Diversification Strategies.” Journal of Financial Economics 99 (1): 204–215. doi: 10.1016/j.jfineco.2010.08.013
  • Vuong, Quang H. 1989. “Likelihood Ratio Tests for Model Selection and Non-Nested Hypotheses.” Econometrica 57 (2): 307–333. doi: 10.2307/1912557

Reprints and Corporate Permissions

Please note: Selecting permissions does not provide access to the full text of the article, please see our help page How do I view content?

To request a reprint or corporate permissions for this article, please click on the relevant link below:

Academic Permissions

Please note: Selecting permissions does not provide access to the full text of the article, please see our help page How do I view content?

Obtain permissions instantly via Rightslink by clicking on the button below:

If you are unable to obtain permissions via Rightslink, please complete and submit this Permissions form. For more information, please visit our Permissions help page.