Extremal quantile autoregression for heavy-tailed time series

Fengyang He, Huixia Judy Wang and Yuejin Zhou

Computational Statistics & Data Analysis, 2022, vol. 176, issue C

Abstract: The conventional quantile estimator of the extreme conditional quantiles under quantile autoregression models is relatively unstable due to data sparsity in the tails. Extreme value theory provides a mathematical foundation of extrapolation to estimate extreme quantiles. However, the asymptotic distributions of existing estimators are often complicated making it inconvenient to apply for statistical inference. We develop a new adaptive estimation procedure based on a generalized Hill estimator of the extreme value index to estimate extreme conditional quantiles in autoregression models. We establish the asymptotic normality of the proposed estimators under some regularity conditions by applying the martingale central limit theorem. The asymptotic variances have closed expressions and can be directly estimated. Based on these results, we propose a procedure to construct confidence intervals for the extreme conditional quantiles. We also provide a diagnostic tool to check the heavy-tailedness of the distribution. Simulation studies and a real data analysis are carried out to demonstrate the advantages of the proposed methods over existing approaches.

Keywords: Extremal quantile autoregression; Extreme conditional quantiles; Extreme value theory; Heavy-tailed time series; Martingale central limit theorem (search for similar items in EconPapers)
Date: 2022
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Persistent link: https://EconPapers.repec.org/RePEc:eee:csdana:v:176:y:2022:i:c:s0167947322001438

DOI: 10.1016/j.csda.2022.107563

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