Inference on the tail process with application to financial time series modeling

Richard A. Davis, Holger Drees, Johan Segers and Michał Warchoł

Journal of Econometrics, 2018, vol. 205, issue 2, 508-525

Abstract: To draw inference on serial extremal dependence within heavy-tailed Markov chains, Drees et al., (2015) proposed nonparametric estimators of the spectral tail process. The methodology can be extended to the more general setting of a stationary, regularly varying time series. The large-sample distribution of the estimators is derived via empirical process theory for cluster functionals. The finite-sample performance of these estimators is evaluated via Monte Carlo simulations. Moreover, two different bootstrap schemes are employed which yield confidence intervals for the pre-asymptotic spectral tail process: the stationary bootstrap and the multiplier block bootstrap. The estimators are applied to stock price data to study the persistence of positive and negative shocks.

Keywords: Financial time series; Heavy-tails; Multiplier block bootstrap; Regular variation; Shock persistence; Stationary time series; Tail process (search for similar items in EconPapers)
Date: 2018
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Citations: View citations in EconPapers (6)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:econom:v:205:y:2018:i:2:p:508-525

DOI: 10.1016/j.jeconom.2018.01.009

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