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Common factors in conditional distributions for Bivariate time series

Granger, Clive W. J. and Terasvirta, Timo and Patton, Andrew J. (2003) Common factors in conditional distributions for Bivariate time series. Discussion paper, 455. Financial Markets Group, London School of Economics and Political Science, London, UK.

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Identification Number: 455

Abstract

A definition for a common factor for bivariate time series is suggested by considering the decomposition of the conditional density into the product of the marginals and the copula, with the conditioning variable being a common factor if it does not directly enter the copula. The links of this definition with a common factor being a dominant feature in standard linear representations is shown. An application using a business cycle indicator as the common factor in the relationship between U.S. income and consumption found that both series held the factor in their marginals but not in the copula.

Item Type: Monograph (Discussion Paper)
Official URL: http://fmg.lse.ac.uk
Additional Information: © 2003 The Authors
Subjects: H Social Sciences > HG Finance
H Social Sciences > HB Economic Theory
Sets: Research centres and groups > Financial Markets Group (FMG)
Collections > Economists Online
Collections > LSE Financial Markets Group (FMG) Working Papers
Date Deposited: 28 Aug 2009 09:13
Last Modified: 27 Feb 2014 15:36
URI: http://eprints.lse.ac.uk/id/eprint/24854

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