Title
How to improve the fit of Archimedean copulas by means of transforms
Author
Faculty/Department
Faculty of Applied Economics
Publication type
article
Publication
Berlin ,
Subject
Mathematics
Source (journal)
Statistical papers. - Berlin
Volume/pages
53(2012) :2 , p. 345-355
ISSN
0932-5026
ISI
000303384300010
Carrier
E
Target language
English (eng)
Full text (Publishers DOI)
Affiliation
University of Antwerp
Abstract
The selection of copulas is an important aspect of dependence modeling issues. In many practical applications, only a limited number of copulas is tested and the copula with the best result for a goodness-of-fit test is chosen, which, however, does not always lead to the best possible fit. In this paper we develop a practical and logical method for improving the goodness-of-fit of a particular Archimedean copula by means of transforms. In order to do this, we introduce concordance invariant transforms which can also be tail dependence preserving, based on an analysis on the lambda-function, lambda = phi/phi is the Archimedean generator. The methodology is applied to the data set studied in Cook and Johnson (J R Stat Soc B 43:210-218, 1981) and Genest and Rivest (J Am Stat Assoc 88:1043-1043, 1993), where we improve the fit of the Frank copula and obtain statistically significant results.
E-info
https://repository.uantwerpen.be/docman/iruaauth/54f631/b221666.pdf
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