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Statistics of Heteroscedastic Extremes

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  • Einmahl, J.H.J.

    (Tilburg University, Center For Economic Research)

  • de Haan, L.F.M.
  • Zhou, C.

Abstract

Abstract: We extend classical extreme value theory to non-identically distributed observations. When the distribution tails are proportional much of extreme value statistics remains valid. The proportionality function for the tails can be estimated nonparametrically along with the (common) extreme value index. Joint asymptotic normality of both estimators is shown; they are asymptotically independent. We develop tests for the proportionality function and for the validity of the model. We show through simulations the good performance of tests for tail homoscedasticity. The results are applied to stock market returns. A main tool is the weak convergence of a weighted sequential tail empirical process.
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Suggested Citation

  • Einmahl, J.H.J. & de Haan, L.F.M. & Zhou, C., 2014. "Statistics of Heteroscedastic Extremes," Discussion Paper 2014-015, Tilburg University, Center for Economic Research.
    • Handle: RePEc:tiu:tiucen:19952ae4-25ff-4e1b-8627-d21d7a62375b
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    References listed on IDEAS

    as
    1. Einmahl, J.H.J. & Gantner, M. & Sawitzki, G., 2008. "The Shorth Plot," Discussion Paper 2008-24, Tilburg University, Center for Economic Research.
    2. Carmela Quintos & Zhenhong Fan & Peter C. B. Phillips, 2001. "Structural Change Tests in Tail Behaviour and the Asian Crisis," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 68(3), pages 633-663.
    3. Phillip Kearns & Adrian Pagan, 1997. "Estimating The Density Tail Index For Financial Time Series," The Review of Economics and Statistics, MIT Press, vol. 79(2), pages 171-175, May.
    4. Jansen, Dennis W & de Vries, Casper G, 1991. "On the Frequency of Large Stock Returns: Putting Booms and Busts into Perspective," The Review of Economics and Statistics, MIT Press, vol. 73(1), pages 18-24, February.
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