Testing the Multivariate Regular Variation Model

CentER Discussion Paper Series No. 2018-044

25 Pages Posted: 19 Nov 2018

See all articles by John H. J. Einmahl

John H. J. Einmahl

Tilburg University - Department of Econometrics & Operations Research

Fan Yang

University of Waterloo - Department of Statistics and Actuarial Science

Chen Zhou

De Nederlandsche Bank; Erasmus University Rotterdam (EUR) - Erasmus School of Economics (ESE)

Date Written: October 29, 2018

Abstract

In this paper, we propose a test for the multivariate regular variation model. The test is based on testing whether the extreme value indices of the radial component conditional on the angular component falling in different subsets are the same. Combining the test on the constancy across different conditional extreme value indices with testing the regular variation of the radial component, we obtain the test for testing multivariate regular variation. Simulation studies demonstrate the good performance of the proposed tests. We apply this test to examine two data sets used in previous studies that are assumed to follow the multivariate regular variation model.

Keywords: Extreme value statistics; Hill estimator; local empirical process

JEL Classification: C12, C14

Suggested Citation

Einmahl, John H. J. and Yang, Fan and Zhou, Chen, Testing the Multivariate Regular Variation Model (October 29, 2018). CentER Discussion Paper Series No. 2018-044, Available at SSRN: https://ssrn.com/abstract=3274566 or http://dx.doi.org/10.2139/ssrn.3274566

John H. J. Einmahl (Contact Author)

Tilburg University - Department of Econometrics & Operations Research ( email )

P.O. Box 90153
5000 LE Tilburg
Netherlands

Fan Yang

University of Waterloo - Department of Statistics and Actuarial Science ( email )

200 University Avenue West
Waterloo, Ontario N2L 3G1
Croatia

Chen Zhou

De Nederlandsche Bank ( email )

PO Box 98
1000 AB Amsterdam
Amsterdam, 1000 AB
Netherlands

Erasmus University Rotterdam (EUR) - Erasmus School of Economics (ESE) ( email )

P.O. Box 1738
3000 DR Rotterdam, NL 3062 PA
Netherlands

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