On copula moment: empirical likelihood based estimation method

PurposeIn this paper, the authors applied the empirical likelihood method, which was originally proposed by Owen, to the copula moment based estimation methods to take advantage of its properties, effectiveness, flexibility and reliability of the nonparametric methods, which have limiting chi-square distributions and may be used to obtain tests or confidence intervals. The authors derive an asymptotically normal estimator of the empirical likelihood based on copula moment estimation methods (ELCM). Finally numerical performance with a simulation experiment of ELCM estimator is studied and compared to the CM estimator, with a good result.Design/methodology/approachIn this paper we applied the empirical likelihood method which originally proposed by Owen, to the copula moment based estimation methods.FindingsWe derive an asymptotically normal estimator of the empirical likelihood based on copula moment estimation methods (ELCM). Finally numerical performance with a simulation experiment of ELCM estimator is studied and compared to the CM estimator, with a good result.Originality/valueIn this paper we applied the empirical likelihood method which originally proposed by Owen 1988, to the copula moment based estimation methods given by Brahimi and Necir 2012. We derive an new estimator of copula parameters and the asymptotic normality of the empirical likelihood based on copula moment estimation methods.

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Testing asymmetric correlations in stock returns via empirical likelihood method

China Finance Review International ◽

10.1108/cfri-08-2012-0091 ◽

2014 ◽

Vol 4 (1) ◽

pp. 42-57 ◽

Cited By ~ 5

Author(s):

Zhiyuan Pan ◽

Xu Zheng ◽

Qiang Chen

Keyword(s):

Stock Market ◽

Stock Returns ◽

Empirical Likelihood ◽

Critical Value ◽

Likelihood Method ◽

Content Type ◽

Empirical Likelihood Method ◽

Model Free ◽

International Stock Markets ◽

China Stock Market

Purpose – This study aims to propose a model-free statistic that tests asymmetric correlations of stock returns, in which stocks move more often with the market when the market goes down than when it goes up, and then empirically analyze the asymmetric correlations of the China stock market and international stock markets, respectively. Design/methodology/approach – Using empirical likelihood method, this study designs and conducts a model-free test, which converges to χ2 distribution under regulated conditions and performs well in the finite sample using bootstrap critical value method. Findings – By analyzing the authors' model-free test, the authors find that compared with Hong et al.'s test that closely relates to the authors, both of the tests are under rejected using asymptotic critical value. However, using the bootstrap critical value method can greatly improve the performance of the two tests. Second, investigating the power of the two tests, the authors find that the proportion of rejections of the authors' test is roughly 10-20 percent larger than Hong et al.'s test in mixed copula model setting. The last finding is the authors find evidence of asymmetric for small-cap size portfolios, but no evidence for middle-cap and large-cap size portfolios in the China stock market. Besides, the authors test asymmetric correlations between the USA and Japan, France and the UK; the asymmetric phenomenon exists in international stock markets, which is similar to Longin and Solnik's findings, but they are not significant according to both the authors' test and Hong et al.'s test. Research limitations/implications – The findings in this study suggest that both the authors' test and Hong et al.'s test are under rejected using asymptotic critical value. When applying these statistics to test asymmetric correlations, the authors should take care with the choice of critical value. Practical implications – The empirical analysis has a significant practical implication for asset allocation, asset pricing and risk management fields. Originality/value – This study constructs a model-free statistic to test asymmetric correlations using empirical likelihood method for the first time and corrects the size performance by bootstrap method, which improves the performance of Hong et al.'s test. To the authors' knowledge, this is the first study to test the asymmetric correlations in the China stock market.

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Empirical Likelihood Testing for Longitudinal Varying Coefficient Models

Applied Mechanics and Materials ◽

10.4028/www.scientific.net/amm.518.356 ◽

2014 ◽

Vol 518 ◽

pp. 356-360

Author(s):

Chang Qing Liu

Keyword(s):

Data Analysis ◽

Empirical Likelihood ◽

Real Data ◽

Likelihood Method ◽

Varying Coefficient Models ◽

Empirical Likelihood Method ◽

Real Data Analysis ◽

Varying Coefficient ◽

Testing Method

By using the empirical likelihood method, a testing method is proposed for longitudinal varying coefficient models. Some simulations and a real data analysis are undertaken to investigate the power of the empirical likelihood based testing method.

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