Robust estimation of Pareto-type tail index through an exponential regression model. Issue 2 (17th January 2023)

• Record Type: Journal Article
• Authors: Minkah, Richard; de Wet, Tertius; Ghosh, Abhik
• Is Part Of: Communications in statistics. Volume 52:Issue 2(2023)
• Page Start: 479
• Page End: 498
• Publication Date: 2023-01-17
• Subjects: Tail index -- robust estimation -- exponential regression model -- extended Pareto distribution -- minimum density power divergence -- maximum likelihood; 62G05 -- 62G32 -- 62G35; Mathematical statistics -- Periodicals; Mathematics; Statistics; 519.2
• DOI: 10.1080/03610926.2021.1916530
• Languages: English
• ISSNs: 0361-0926

Abstract

Abstract: In this paper, we introduce a robust estimator of the tail index of a Pareto-type distribution. The estimator is obtained through the use of the minimum density power divergence with an exponential regression model for log-spacings of top order statistics. The proposed estimator is compared to existing minimum density power divergence estimators of the tail index based on fitting an extended Pareto distribution and exponential regression model on log-ratio of spacings of order statistics. We derive the influence function and gross error sensitivity of the proposed estimator of the tail index to study its robustness properties. In addition, a simulation study is conducted to assess the performance of the estimators under different contaminated samples from different distributions. The results show that our proposed estimator of the tail index has better mean square errors and is less sensitive to an increase in the number of top order statistics. In addition, the estimation of the exponential regression model yields estimates of second-order parameters that can be used for estimation of extreme events such as quantiles and exceedance probabilities. The proposed estimator is illustrated with practical datasets on insurance claims and calcium content in soil samples.