Hendrik Supper
A Comparison of Tail Dependence Estimators
Supper, Hendrik; Irresberger, Felix; Weiss, Gregor N.F.
Abstract
We review several commonly used methods for estimating the tail dependence in a given data sample. In simulations, we show that especially static estimators produce severely biased estimates of tail dependence when applied to samples with time-varying extreme dependence. In some instances, using static estimators for time-varying data leads to estimates more than twice as high as the true tail dependence. Our findings attenuate the need to account for the time-variation in extreme dependence by using dynamic models. Taking all simulations into account, the dynamic tail dependence estimators perform best with the Dynamic Symmetric Copula (DSC) taking the lead. We test our findings in an empirical study and show that the choice of estimator significantly affects the importance of tail dependence for asset prices.
Citation
Supper, H., Irresberger, F., & Weiss, G. N. (2020). A Comparison of Tail Dependence Estimators. European Journal of Operational Research, 284(2), 728-742. https://doi.org/10.1016/j.ejor.2019.12.041
Journal Article Type | Article |
---|---|
Acceptance Date | Dec 27, 2019 |
Online Publication Date | Jan 13, 2020 |
Publication Date | 2020-07 |
Deposit Date | Jul 23, 2020 |
Publicly Available Date | Jan 13, 2022 |
Journal | European Journal of Operational Research |
Print ISSN | 0377-2217 |
Electronic ISSN | 1872-6860 |
Publisher | Elsevier |
Peer Reviewed | Peer Reviewed |
Volume | 284 |
Issue | 2 |
Pages | 728-742 |
DOI | https://doi.org/10.1016/j.ejor.2019.12.041 |
Public URL | https://durham-repository.worktribe.com/output/1296782 |
Related Public URLs | http://eprints.whiterose.ac.uk/155056/ |
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Copyright Statement
© 2020 This manuscript version is made available under the CC-BY-NC-ND 4.0 license http://creativecommons.org/licenses/by-nc-nd/4.0/
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