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Extremal properties of M4 processes

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  • A. Martins
  • H. Ferreira

Abstract

The existence of data with different dependence structures motivates the development of models which can capture several types of dependence. In this paper we consider a stationary sequence of moving maxima vectors $$\{{\mathbf {X}}_n=(X_{n1},\ldots ,X_{nd})\}_{n\ge 1}$$ { X n = ( X n 1 , … , X n d ) } n ≥ 1 having innovations $${\mathbf {Z}}_{l,n}=(Z_{l,n,1},\ldots ,Z_{l,n,d})$$ Z l , n = ( Z l , n , 1 , … , Z l , n , d ) with totally dependent margins for certain values of $$l,$$ l , $$l\in I_1,$$ l ∈ I 1 , and independent margins for the remaining values of $$l,$$ l , $$l\in I_2.$$ l ∈ I 2 . We obtain in this way a $$d$$ d -dimensional process $$\{{\mathbf {X}}_n\}_{n\ge 1}$$ { X n } n ≥ 1 whose extremal dependence, measured by the tail dependence coefficients, lies between asymptotic independence and total dependence. The extremal properties of these M4 processes are studied and examined both theoretically and through simulation studies: we derive the multivariate extremal index, the tail dependence coefficients and co-movement indices. Copyright Sociedad de Estadística e Investigación Operativa 2014

Suggested Citation

  • A. Martins & H. Ferreira, 2014. "Extremal properties of M4 processes," TEST: An Official Journal of the Spanish Society of Statistics and Operations Research, Springer;Sociedad de Estadística e Investigación Operativa, vol. 23(2), pages 388-408, June.
  • Handle: RePEc:spr:testjl:v:23:y:2014:i:2:p:388-408
    DOI: 10.1007/s11749-014-0358-6
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    References listed on IDEAS

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    1. Zhengjun Zhang, 2009. "On approximating max-stable processes and constructing extremal copula functions," Statistical Inference for Stochastic Processes, Springer, vol. 12(1), pages 89-114, February.
    2. Ferreira, Helena, 2012. "Multivariate maxima of moving multivariate maxima," Statistics & Probability Letters, Elsevier, vol. 82(8), pages 1489-1496.
    3. Li, Haijun, 2009. "Orthant tail dependence of multivariate extreme value distributions," Journal of Multivariate Analysis, Elsevier, vol. 100(1), pages 243-256, January.
    4. Zhang, Zhengjun & Shinki, Kazuhiko, 2007. "Extreme co-movements and extreme impacts in high frequency data in finance," Journal of Banking & Finance, Elsevier, vol. 31(5), pages 1399-1415, May.
    5. Liebscher, Eckhard, 2008. "Construction of asymmetric multivariate copulas," Journal of Multivariate Analysis, Elsevier, vol. 99(10), pages 2234-2250, November.
    6. A. Martins & H. Ferreira, 2005. "The multivariate extremal index and the dependence structure of a multivariate extreme value distribution," TEST: An Official Journal of the Spanish Society of Statistics and Operations Research, Springer;Sociedad de Estadística e Investigación Operativa, vol. 14(2), pages 433-448, December.
    7. Deheuvels, Paul, 1983. "Point processes and multivariate extreme values," Journal of Multivariate Analysis, Elsevier, vol. 13(2), pages 257-272, June.
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    More about this item

    Keywords

    Multivariate extremes; M4 processes; Tail dependence; Extremal index; Co-movement index; 60G70;
    All these keywords.

    JEL classification:

    • M4 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting

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