Copula-based dynamic models for multivariate time series

• Published in: Journal of multivariate analysis Vol. 172; pp. 107 - 121
• Main Authors: Nasri, Bouchra R., Rémillard, Bruno N.
• Format: Journal Article
• Language: English
• Published: Elsevier Inc 01.07.2019
• Subjects: Copulas; Dynamic models; Generalized error models; Goodness-of-fit; Time series; 62M99; Copulas; Secondary; Goodness-of-fit; Primary; Time series; Dynamic models; 91B84; Generalized error models; 62H12
• ISSN: 0047-259X; 1095-7243
• DOI: 10.1016/j.jmva.2019.03.002

In this paper, we propose an intuitive way to couple several dynamic time series models even when there are no innovations. This extends previous work for modeling dependence between innovations of stochastic volatility models. We consider time-dependent and time-independent copula models and we study the asymptotic behavior of some empirical processes constructed from pseudo-observations, as well as the behavior of maximum pseudo-likelihood estimators of the associated copula parameters. The results show that even if the univariate dynamic models depend on unknown parameters, the limiting behavior of many processes of interest does not depend on the estimation errors. One can perform tests for change points on the full distribution, the margins or the copula, as if the parameters of the dynamic models were known. This is also true for some parametric models of time-dependent copulas. This interesting property makes it possible to construct consistent tests of specification for the dependence models, without having to consider the dynamic time series models. Monte Carlo simulations are used to demonstrate the power of the proposed goodness-of-fit test in finite samples. An application to financial data is given.