Pareto Tail Index Estimation Revisited

Mark Finkelstein, Howard G. Tucker and Jerry Alan Veeh

North American Actuarial Journal, 2006, vol. 10, issue 1, 1-10

Abstract: An estimator of the tail index of a Pareto distribution is given that is based on the use of the probability integral transform. This new estimator provides performance that is comparable to the best robust estimators, while retaining conceptual and computational simplicity. A tuning parameter in the new estimator can be adjusted to control the tradeoff between robustness and efficiency. The method used to compute the estimator also can be used to find a confidence interval for the tail index that is guaranteed to have the nominal confidence level for any given sample size. Guidelines for the use of the new estimator are provided.

Date: 2006
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DOI: 10.1080/10920277.2006.10596236

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