Bayesian modelling of skewness and kurtosis with two-piece scale and shape transformations

Francisco Javier Rubio and Mark Steel

MPRA Paper from University Library of Munich, Germany

Abstract: We introduce the family of univariate double two–piece distributions, obtained by using a density– based transformation of unimodal symmetric continuous distributions with a shape parameter. The resulting distributions contain five interpretable parameters that control the mode, as well as the scale and shape in each direction. Four-parameter subfamilies of this class of distributions that capture different types of asymmetry are presented. We propose interpretable scale and location-invariant benchmark priors and derive conditions for the existence of the corresponding posterior distribution. The prior structures used allow for meaningful comparisons through Bayes factors within flexible families of distributions. These distributions are applied to models in finance, internet traffic data, and medicine, comparing them with appropriate competitors.

Keywords: model comparison; posterior existence; prior elicitation; scale mixtures of normals; unimodal continuous distributions (search for similar items in EconPapers)
JEL-codes: C11 C16 (search for similar items in EconPapers)
Date: 2014-06-30
New Economics Papers: this item is included in nep-ecm
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Citations: View citations in EconPapers (1)

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