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Statistical analysis of empirical pairwise copulas for the S&P 500 stocks
KTH, School of Engineering Sciences (SCI), Mathematics (Dept.), Mathematical Statistics. (Matematisk statistik)
2012 (English)Independent thesis Advanced level (degree of Master (One Year)), 20 credits / 30 HE creditsStudent thesis
Abstract [en]

It is of great importance to find an analytical copula that will represent the empirical lower tail dependence. In this study, the pairwise empirical copula are estimated using data of the S&P 500 stocks during the period 2007-2010.Different optimization methods and measures of dependence have been used to fit Gaussian, t and Clayton copula to the empirical copulas, in order to represent the empirical lower tail dependence. These different measures of dependence and optimization methods with their restrictions, point at different analytical copulas being optimal. In this study the t copula with 5 degrees of freedom is giving the most fulfilling result, when it comes to representing lower tail dependence. The t copula with 5 degrees of freedom gives the best representation of empirical lower tail dependence, whether one uses the 'Empirical maximum likelihood estimator', or 'Equal Ƭ' as an approach.


Place, publisher, year, edition, pages
2012. , 73 p.
Trita-MAT, ISSN 1401-2286 ; 2012:23
Keyword [en]
Tail dependence, Tail concentration function, Measure of similarity, Copula, Archimedean, Kendall's tau, Spearman's rho, Gaussian, t copula, Clayton
National Category
Probability Theory and Statistics
URN: urn:nbn:se:kth:diva-103086OAI: diva2:558590
Educational program
Master of Science in Engineering - Vehicle Engineering
Physics, Chemistry, Mathematics
Available from: 2012-10-04 Created: 2012-10-03 Last updated: 2012-10-04Bibliographically approved

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