Statistics for tail processes of Markov chains

DOI10.1007/S10687-015-0217-1MaRDI QIDQ497485zbMATH OpenOpenAlexFDO

Authors Michał Warchoł, Holger Drees, Johan Segers

Publication date 24 September 2015

Published in Extremes (Search for Journal in Brave)

Full work available at URL https://arxiv.org/abs/1405.7721

zbMATH Keywords

stationary time seriesregular variationtime reversibilityheavy-tailed Markov chainstail process

Mathematics Subject Classification ID

Asymptotic properties of nonparametric inference (62G20) Time series, auto-correlation, regression, etc. in statistics (GARCH) (62M10) Statistics of extreme values; tail inference (62G32)

Abstract: At high levels, the asymptotic distribution of a stationary, regularly varying Markov chain is conveniently given by its tail process. The latter takes the form of a geometric random walk, the increment distribution depending on the sign of the process at the current state and on the flow of time, either forward or backward. Estimation of the tail process provides a nonparametric approach to analyze extreme values. A duality between the distributions of the forward and backward increments provides additional information that can be exploited in the construction of more efficient estimators. The large-sample distribution of such estimators is derived via empirical process theory for cluster functionals. Their finite-sample performance is evaluated via Monte Carlo simulations involving copula-based Markov models and solutions to stochastic recurrence equations. The estimators are applied to stock price data to study the absence or presence of symmetries in the succession of large gains and losses.

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