A0316
Title: Testing the simplifying assumption in high-dimensional vine copulas
Authors: Fabian Spanhel - LMU (Germany) [presenting]
Malte Kurz - Ludwig-Maximilians-University Munich (Germany)
Abstract: Testing the simplifying assumption in high-dimensional vine copulas is a difficult task because tests must be based on estimated observations and amount to checking constraints on high-dimensional distributions. So far, corresponding tests have been limited to single conditional copulas with a low-dimensional set of conditioning variables. We propose a novel testing procedure that is computationally feasible for high-dimensional data sets and that exhibits a power that decreases only slightly with the dimension. By discretizing the support of the conditioning variables and incorporating a penalty in the test statistic, we mitigate the curse of dimensions by looking for the possibly strongest deviation from the simplifying assumption. The use of a decision tree renders the test computationally feasible for large dimensions. We derive the asymptotic distribution of the test and analyze its finite sample performance in an extensive simulation study. The utility of the test is demonstrated by its application to 10 data sets with up to 49 dimensions.
