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arXiv · 2404.00864

Convolution-t Distributions

Peter Reinhard Hansen·Chen Tong
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Abstract

We introduce a new class of multivariate heavy-tailed distributions that are convolutions of heterogeneous multivariate t-distributions. Unlike commonly used heavy-tailed distributions, the multivariate convolution-t distributions embody cluster structures with flexible nonlinear dependencies and heterogeneous marginal distributions. Importantly, convolution-t distributions have simple density functions that facilitate estimation and likelihood-based inference. The characteristic features of convolution-t distributions are found to be important in an empirical analysis of realized volatility measures and help identify their underlying factor structure.

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Peter Reinhard Hansen, Chen Tong. 2024-04-01. Convolution-t Distributions. https://arxiv.org/abs/2404.00864

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