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Activity Number: 577
Type: Contributed
Date/Time: Wednesday, August 1, 2012 : 2:00 PM to 3:50 PM
Sponsor: International Chinese Statistical Association
Abstract - #304549
Title: Multivariate Density Forecast: An Application to Multivariate Duration Models
Author(s): Yingying Sun*+ and Gloria González-Rivera
Companies: University of California at Riverside and University of California at Riverside
Address: 875 Grape Street, Riverside, CA, 92507, United States
Keywords: autocontour ; multivariate duration ; copula ; Probability integral transform ; density forecast
Abstract:

We test the null hypothesis of a correct density forecast by applying the autocontour methodology (González-Rivera et al. 2011) on i.i.d. U[0,1] probability integral transforms. Our testing is directly applicable to univariate and multivariate density models with either continuous or discrete random variables, and it allows the researcher to focus on different areas of the conditional density model to assess those regions of interest. We construct hyper-cubes of different sizes within the maximum hyper-cube formed by a multidimensional uniform density [0,1]^n. We assess the location of the empirical PITs within the corresponding population hyper-cubes. If the density model is correct, the volumes of the population hyper-cubes must be the same as those in their empirical counterparts. We propose several statistical tests with standard asymptotic distributions and assess multivariate duration models. We choose a copula to produce the multivariate distribution. Our tests reject the Gaussian copula for the substantial asymmetry for long versus short duration. Instead, a Clayton copula seems to be preferred when durations are short and the number of transactions is large.


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