A New Family of Copulas, with Application to Estimation of a Production Frontier System
Peter Schmidt, Department of Economics, Michigan State University, USA
In this talk we propose a new family of copulas for which the copula arguments are uncorrelated but dependent. Specifically, if w_1 and w_2 are the uniform random variables in the copula, they are uncorrelated, but w_1 is correlated with |w_2 - ½|. We show how this family of copulas can be applied to the error structure in an econometric production frontier model. We also generalize the family of copulas to three or more dimensions, and we give an empirical application. This is joint work with Christine Amsler and Artem B. Prokhorov.