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Asymmetric stable Paretian distribution testing


Paolella, Marc S (2017). Asymmetric stable Paretian distribution testing. Econometrics and Statistics, 1:19-39.

Abstract

Two new tests for the symmetric stable Paretian distribution with tail index 1 < α < 2 are proposed. The test statistics and their associated approximate p-values are instantly computed and do not require use of the stable density or distribution or maximum likelihood estimation. They exhibit high power against a variety of alternatives, and much higher power than the existing test based on the empirical characteristic function. The two tests are combined to yield a test that has substantially higher power. A fourth test based on likelihood ratio is also studied. Extensions are proposed to address the asymmetric case and are shown to have reasonable actual size properties and high power against several viable alternatives.

Abstract

Two new tests for the symmetric stable Paretian distribution with tail index 1 < α < 2 are proposed. The test statistics and their associated approximate p-values are instantly computed and do not require use of the stable density or distribution or maximum likelihood estimation. They exhibit high power against a variety of alternatives, and much higher power than the existing test based on the empirical characteristic function. The two tests are combined to yield a test that has substantially higher power. A fourth test based on likelihood ratio is also studied. Extensions are proposed to address the asymmetric case and are shown to have reasonable actual size properties and high power against several viable alternatives.

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Additional indexing

Item Type:Journal Article, refereed, original work
Communities & Collections:03 Faculty of Economics > Department of Banking and Finance
Dewey Decimal Classification:330 Economics
Language:English
Date:January 2017
Deposited On:22 Nov 2017 14:26
Last Modified:20 Feb 2018 04:10
Publisher:Elsevier
ISSN:2468-0389
OA Status:Closed
Publisher DOI:https://doi.org/10.1016/j.ecosta.2016.05.002
Other Identification Number:merlin-id:15382

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