Project CEMAPRE internal
|Title||Testing for Breaks in the Tails|
|Participants||João Nicolau (Principal Investigator), Paulo Rodrigues|
|Summary||There has been a growing interest in the tail behaviour of time series leading to a rapidly growing|
literature in recent years. The tail index is of importance in extreme value theory as it determines
the asymptotic distribution of many statistics and, in particular, the characteristics of the tails.
Given that unusual large movements in economic and financial time series seem to occur more often
than justified by normality and since in practice the exact distribution of the innovations is not
known, it is important to obtain insights on the tail properties of data. Frequently it is assumed
that the tail index is constant over the observed time domain. However, recent literature has found
that this is not always true, particularly in finance.