On the Estimation of the Extremal Index Based on Scaling and Resampling
Journal of Computational and Graphical Statistics, Vol. 18, No. 3, pp. 731-755, 2009
38 Pages Posted: 14 Apr 2010
Date Written: April 14, 2009
The extremal index parameter characterizes the degree of local dependence in the extremes of a stationary time series and has important applications in a number of areas, such as hydrology, telecommunications, finance, and environmental studies. In this study, a novel estimator for the extremal index based on the asymptotic scaling of block-maxima and resampling is introduced. It is shown to be consistent and asymptotically normal for a large class of m-dependent time series.
Further, a procedure for the automatic selection of its tuning parameter is developed and different types of confidence intervals that prove useful in practice proposed. The performance of the estimator is examined through simulations, which show its highly competitive behavior. Finally, the estimator is applied to three real datasets of daily crude oil prices, daily returns of the S&P 500 stock index, and high-frequency, intraday traded volumes of a stock. These applications demonstrate additional diagnostic features of statistical plots based on the new estimator.
Keywords: Extremal Index, Clustering, Asymptotic normality, Bootstrap, Heavy tails, Permutation
JEL Classification: C1
Suggested Citation: Suggested Citation