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2012 | 4 | nr 2 | 117--142
Tytuł artykułu

A Bivariate Copula-based Model for a Mixed Binary-Continuous Distribution: A Time Series Approach

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In this paper we present a copula-based model for a binary and a continuous variable in a time series setup. Within this modeling framework both marginals can be equipped with their own dynamics whereas the contemporaneous dependence between both processes can be flexibly captured via a copula function. We propose a method for testing the goodness-offit of such a time series model using probability integral transforms (PIT). This verification procedure allows not only a verification of the goodness-offit of the estimated marginal distribution for a continuous variable but also the conditional distribution of a continuous variable given the outcome of its binary counterpart (i.e. the adequacy of the copula choice). We test the model on an empirical example: investigating the relationship between trading volume and the indicators of arbitrarily 'large' price movements on the interbank EUR/PLN spot market. (original abstract)
Opis fizyczny
  • Warsaw School of Economics, Poland; National Bank of Poland
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