Efficient Estimation of Some Elliptical Copula Regression Models through Scale Mixtures of Normal

49 Pages Posted: 7 Aug 2012

See all articles by Nuttanan Wichitaksorn

Nuttanan Wichitaksorn

Auckland University of Technology; University of Canterbury; Thailand Development Research Institute

Richard H. Gerlach

University of Sydney

Boris Choy

University of Sydney Business School

Date Written: August 6, 2012

Abstract

We simplify the implementation of some elliptical copula regression models through the normal representation. Both copula and marginal probability density functions are expressed as the scale mixtures of normals to facilitate the estimation procedure. With the fact that all elliptical distributions have the same correlation structure and some of them can be expressed as a scale mixture of multivariate normal, we can then estimate their correlation matrix with ease. Two simulation studies are illustrated to assess the performance of our proposed models and methods. We also conduct two empirical studies on U.S. excess return and Thai wage earnings to show the applicability to the multivariate Capital Asset Pricing Model and the bivariate seemingly unrelated Tobit model, respectively.

Keywords: Elliptical Copulas, Scale Mixtures of Normal, Markov Chain Monte Carlo, Capital Asset Pricing Model, Seemingly Unrelated Tobit Model

JEL Classification: C110, C130, C320, C340, G120, J310

Suggested Citation

Wichitaksorn, Nuttanan and Gerlach, Richard H. and Choy, S. T. Boris, Efficient Estimation of Some Elliptical Copula Regression Models through Scale Mixtures of Normal (August 6, 2012). Available at SSRN: https://ssrn.com/abstract=2125587 or http://dx.doi.org/10.2139/ssrn.2125587

Nuttanan Wichitaksorn (Contact Author)

Auckland University of Technology ( email )

AUT City Campus
Private Bag 92006
Auckland, 1142
New Zealand

University of Canterbury ( email )

Ilam Road
Christchurch 8140
New Zealand

Thailand Development Research Institute ( email )

Bangkok
Thailand

Richard H. Gerlach

University of Sydney ( email )

Room 483, Building H04
University of Sydney
Sydney, NSW 2006
Australia
+ 612 9351 3944 (Phone)
+ 612 9351 6409 (Fax)

HOME PAGE: http://www.econ.usyd.edu.au/staff/richardg

S. T. Boris Choy

University of Sydney Business School ( email )

Cnr. of Codrington and Rose Streets
Sydney, NSW 2006
Australia

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