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The method of simulated quantiles
Dominicy, Yves Veredas, David
Dominicy, Yves
Veredas, David
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Publication Type
Journal article with impact factor
Editor
Supervisor
Publication Year
2013
Journal
Journal of Econometrics
Book
Publication Volume
172
Publication Issue
2
Publication Begin page
235
Publication End page
247
Publication Number of pages
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Abstract
We introduce the Method of Simulated Quantiles, or MSQ, an indirect inference method based on quantile matching that is useful for situations where the density function does not have a closed form and/or moments do not exist. Functions of theoretical quantiles, which depend on the parameters of the assumed probability law, are matched with the sample counterparts, which depend on the observations. Since the theoretical quantiles may not be available analytically, the optimization is based on simulations. We illustrate the method with the estimation of -stable distributions. A thorough Monte Carlo study and an illustration to 22 financial indexes show the usefulness of MSQ.
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Keywords
Accounting & Finance, Quantiles, Simulation, Matching, Inference