Methods to Distinguish Between Polynomial and Exponential Tails

Joan Del Castillo, Jalila Daoudi, Richard Lockhart

Research output: Contribution to journalArticleResearchpeer-review

13 Citations (Scopus)

Abstract

Two methods to distinguish between polynomial and exponential tails are introduced. The methods are based on the properties of the residual coefficient of variation for the exponential and non-exponential distributions. A graphical method, called a CV-plot, shows departures from exponentiality in the tails. The plot is applied to the daily log-returns of exchange rates of US dollar and Japanese yen. New statistics are introduced for testing the exponentiality of tails using multiple thresholds. They give better control of the significance level than previous tests. The powers of the new tests are compared with those of some others for various sample sizes. © 2014 Board of the Foundation of the Scandinavian Journal of Statistics..
Original languageEnglish
Pages (from-to)382-393
JournalScandinavian Journal of Statistics
Volume41
DOIs
Publication statusPublished - 1 Jan 2014

Keywords

  • Extreme value theory
  • Heavy tailed distributions
  • Multiple testing problem
  • Power distributions
  • Residual coefficient of variation

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