Handbook of Economic Forecasting

Chapter 16

Copula Methods for Forecasting Multivariate Time Series

Andrew Patton,     Duke University, NC, USA

Abstract

Copula-based models provide a great deal of flexibility in modeling multivariate distributions, allowing the researcher to specify the models for the marginal distributions separately from the dependence structure (copula) that links them to form a joint distribution. In addition to flexibility, this often also facilitates estimation of the model in stages, reducing the computational burden. This chapter reviews the growing literature on copula-based models for economic and financial time series data, and discusses in detail methods for estimation, inference, goodness-of-fit testing, and model selection that are useful when ...