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An Empirical Examination of Maximum Entropy in Copula-Based Simultaneous Equations Model

Kanchana Choktaworn, Paravee Maneejuk, Woraphon Yamaka

Abstract


In our previous work, copulas were used to connect different marginal distributions in a system of linear equations. And in this study, we aim to further improve the way to join the marginal distributions. We propose entropy copula-based simultaneous equations model, in which the copulas are employed to improve the modeling of joint distribution. Under this model, we do not have to assume a specific distribution for the margins; instead, they are derived from the entropy method. This study will provide a conceptual idea of bivariate entropy copula-based simultaneous equations model and an explanation of how this method works. Then, an empirical experiment will be conducted to explore the performance of our proposed model.

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|ISSN 1686-0209|