Groupe d’études et de recherche en analyse des décisions

Nonparametric Estimation and Inference for the Copula Parameter in Conditional Copulas

Elif Fidan Acar

The primary objective of this presentation is the elucidation of covariate effects on the dependence structure of random variables in bivariate or multivariate models. We develop a unified approach via a conditional copula model in which the copula is parametric and its parameter varies as the covariate. We propose a nonparametric procedure based on local likelihood to estimate the functional relationship between the copula parameter and the covariate, derive the asymptotic properties of the proposed estimator and outline the construction of pointwise confidence intervals. We also contribute a novel conditional copula selection method based on cross-validated prediction errors and a generalized likelihood ratio-type test to determine if the copula parameter varies significantly. We derive the asymptotic null distribution of the formal test. Using a subset of the Matched Multiple Birth dataset, we demonstrate the performance of these procedures via analyses of gestational age- specific twin birth weights.

This is joint work with Radu Craiu (University of Toronto) and Fang Yao (University of Toronto).