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Black swans or dragon kings? A simple test for deviations from the power law

Author

Listed:
  • Janczura, Joanna
  • Weron, Rafal

Abstract

We develop a simple test for deviations from power law tails, which is based on the asymptotic properties of the empirical distribution function. We use this test to answer the question whether great natural disasters, financial crashes or electricity price spikes should be classified as dragon kings or 'only' as black swans.

Suggested Citation

  • Janczura, Joanna & Weron, Rafal, 2011. "Black swans or dragon kings? A simple test for deviations from the power law," MPRA Paper 28959, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:28959
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    References listed on IDEAS

    as
    1. Pavel Cizek & Wolfgang Karl Härdle & Rafal Weron, 2005. "Statistical Tools for Finance and Insurance," HSC Books, Hugo Steinhaus Center, Wroclaw University of Technology, number hsbook0501, December.
    2. Rafal Weron & Adam Misiorek, 2005. "Modeling and forecasting electricity loads: A comparison," Econometrics 0502004, University Library of Munich, Germany.
    3. Krzysztof Burnecki & Rafal Weron, 2006. "Visualization tools for insurance risk processes," HSC Research Reports HSC/06/06, Hugo Steinhaus Center, Wroclaw University of Technology.
    4. Rafal Weron, 2006. "Modeling and Forecasting Electricity Loads and Prices: A Statistical Approach," HSC Books, Hugo Steinhaus Center, Wroclaw University of Technology, number hsbook0601, December.
    Full references (including those not matched with items on IDEAS)

    Citations

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    Cited by:

    1. Wylomanska-, Agnieszka, 2010. "Measures of dependence for Ornstein-Uhlenbeck processes with tempered stable distribution," MPRA Paper 28535, University Library of Munich, Germany, revised 2010.
    2. Joanna Janczura & Sebastian Orzel & Agnieszka Wylomanska, 2011. "Subordinated alpha-stable Ornstein-Uhlenbeck process as a tool for financial data description," HSC Research Reports HSC/11/03, Hugo Steinhaus Center, Wroclaw University of Technology.
    3. Marek Teuerle & Piotr Zebrowski & Marcin Magdziarz, 2011. "Multidimensional Levy walk and its scaling limits," HSC Research Reports HSC/11/06, Hugo Steinhaus Center, Wroclaw University of Technology.

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    More about this item

    Keywords

    dragon king; black swan; outlier; power law;
    All these keywords.

    JEL classification:

    • C16 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Econometric and Statistical Methods; Specific Distributions
    • C12 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Hypothesis Testing: General
    • Q47 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy Forecasting
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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