Dynamic distributions and changing copulas
نویسنده
چکیده
A copula models the relationships between variables independently of their marginal distributions. When the variables are time series, the copula may change over time. A statistical framework is suggested for tracking these changes over time. When the marginal distributions change, pre- ltering is necessary before constructing the indicator variables on which the tracking of the copula is based. This entails solving an even more basic problem, namely estimating time-varying quantiles. The methods are applied to the Hong Kong and Korean stock market indices. Some interesting movements are detected, particularly after the attack on the Hong Kong dollar in 1997. KEYWORDS: Concordance, contagion, EWMA; quantiles; signal extraction, tail dependence. JEL Classi cation: C14, C22 PRELIMINARY DRAFT PLEASE DO NOT QUOTE WITHOUT PERMISSION
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