Vasicek Quantile and Mean Regression Models for Bounded Data: New Formulation, Mathematical Derivations, and Numerical Applications

Josmar Mazucheli, Bruna Alves, Mustafa Korkmaz, Víctor Leiva

Research output: Contribution to journalArticlepeer-review

4 Scopus citations

Abstract

The Vasicek distribution is a two-parameter probability model with bounded support on the open unit interval. This distribution allows for different and flexible shapes and plays an important role in many statistical applications, especially for modeling default rates in the field of finance. Although its probability density function resembles some well-known distributions, such as the beta and Kumaraswamy models, the Vasicek distribution has not been considered to analyze data on the unit interval, especially when we have, in addition to a response variable, one or more covariates. In this paper, we propose to estimate quantiles or means, conditional on covariates, assuming that the response variable is Vasicek distributed. Through appropriate link functions, two Vasicek regression models for data on the unit interval are formulated: one considers a quantile parameterization and another one its original parameterization. Monte Carlo simulations are provided to assess the statistical properties of the maximum likelihood estimators, as well as the coverage probability. An R package developed by the authors, named vasicekreg, makes available the results of the present investigation. Applications with two real data sets are conducted for illustrative purposes: in one of them, the unit Vasicek quantile regression outperforms the models based on the Johnson-SB, Kumaraswamy, unit-logistic, and unit-Weibull distributions, whereas in the second one, the unit Vasicek mean regression outperforms the fits obtained by the beta and simplex distributions. Our investigation suggests that unit Vasicek quantile and mean regressions can be of practical usage as alternatives to some well-known models for analyzing data on the unit interval.

Original languageEnglish
Article number1389
JournalMathematics
Volume10
Issue number9
DOIs
StatePublished - 1 May 2022
Externally publishedYes

Keywords

  • maximum likelihood method
  • mean regression
  • Monte Carlo simulation
  • parametric quantile regression
  • R software

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