Economics at your fingertips  

A New Family of Consistent and Asymptotically-Normal Estimators for the Extremal Index

Jose Olmo ()

Econometrics, 2015, vol. 3, issue 3, 1-21

Abstract: The extremal index (θ) is the key parameter for extending extreme value theory results from i.i.d. to stationary sequences. One important property of this parameter is that its inverse determines the degree of clustering in the extremes. This article introduces a novel interpretation of the extremal index as a limiting probability characterized by two Poisson processes and a simple family of estimators derived from this new characterization. Unlike most estimators for θ in the literature, this estimator is consistent, asymptotically normal and very stable across partitions of the sample. Further, we show in an extensive simulation study that this estimator outperforms in finite samples the logs, blocks and runs estimation methods. Finally, we apply this new estimator to test for clustering of extremes in monthly time series of unemployment growth and inflation rates and conclude that runs of large unemployment rates are more prolonged than periods of high inflation.

Keywords: asymptotic theory; clustering of extremes; extremal index; extreme value theory; order statistics (search for similar items in EconPapers)
JEL-codes: B23 C C00 C01 C1 C2 C3 C4 C5 C8 (search for similar items in EconPapers)
Date: 2015
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed

Downloads: (external link) (application/pdf) (text/html)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link:

Access Statistics for this article

Econometrics is currently edited by Prof. Dr. Kerry Patterson

More articles in Econometrics from MDPI, Open Access Journal
Bibliographic data for series maintained by XML Conversion Team ().

Page updated 2020-08-12
Handle: RePEc:gam:jecnmx:v:3:y:2015:i:3:p:633-653:d:55020