Dynamic Skew-t Copula Modelling for Multivariate Asset Price Movement

Abstract

We summarize modelling and estimating two types of dynamic skew-t copulas. The first one is for the dynamic generalized hyperbolic skew-t copula proposed by Ito and Nakamura (2019). The second one is for the dynamic Azzalini—Capitanio skew-t copula proposed by Ito and Yoshiba (2025). After summarizing the methods, we conduct empirical analysis using the fifteen-years weekly stock returns for two groups composed by three sectors from TOPIX 33 sectors. In results, we show the significance of the tail dependence and asymmetry and dynamic modelling for correlation matrix is more effective than static correlation matrix in terms of information criteria.