Extremogram and Ex-Periodogram for heavy-tailed time series

Transcription

1 Extremogram and Ex-Periodogram for heavy-tailed time series 1 Thomas Mikosch University of Copenhagen Joint work with Richard A. Davis (Columbia) and Yuwei Zhao (Ulm) 1 Jussieu, April 9,

2 2 Extremal dependence and heavy tails in real-life data USD DEM USD FFR Figure 1. Scatterplot of 5 minute foreign exchange rate log-returns, USD-DEM against USD-FRF.

3 3 Teletraffic file sizes X_t 0e+00 1e+06 2e+06 3e+06 4e+06 5e+06 0e+00 1e+06 2e+06 3e+06 4e+06 5e+06 X_(t 1) Figure 2. Scatterplot of file sizes of teletraffic data - extremal independence

4 4 1. Regularly varying stationary sequences An R d -valued strictly stationary sequence (X t ) is regularly varying with index α > 0 if its finite-dimensional distributions are regularly varying with index α: For every k 1, there exists a non-null Radon measure µ k in R dk 0 such that as x, P(x 1 (X 1,..., X k ) ) P( X 1 > x) v µ k ( ). For d = k = 1, t > 0: for some p, q 0 such that p + q = 1, P(x 1 X 1 (t, )) P( X 1 > x) p t α and P(x 1 X 1 (, t]) P( X 1 > x) q t α.

5 The measures µ k determine the extremal dependence structure of the finite-dimensional distributions and have the scaling property µ k (ta) = t α µ k (A), t > 0, for some α > 0. 5 Alternatively, Basrak, Segers (2009) for α > 0, k 0, P(x 1 (X 0,..., X k ) X 0 > x) w P((Y 0,..., Y k ) ), Y 0 is independent of (Y 0,..., Y k )/ Y 0 and P( Y 0 > y) = y α, y > 1.

6 6 Examples. IID sequence (Z t ) with regularly varying Z 0. Starting from a Gaussian linear process, transform marginals to a student distribution. Linear processes e.g. ARMA processes with iid regularly varying noise (Z t ). Rootzén (1978,1983), Davis, Resnick (1985) Solutions to stochastic recurrence equation: X t = A t X t 1 + B t Kesten (1973), Goldie (1991) GARCH process. X t = σ t Z t, σ 2 t = α 0 + (α 1 Z 2 t 1 + β 1)σ 2 t 1 Bollerslev (1986), M., Stărică (2000), Davis, M. (1998), Basrak, Davis, M. (2000,2002) The simple stochastic volatility model with iid regularly varying noise. Davis, M. (2001)

7 Infinite variance α-stable stationary processes are regularly 7 varying with index α (0, 2). Samorodnitsky, Taqqu (1994), Rosiński (1995,2000) Max-stable stationary processes with Fréchet (Φ α ) marginals are regularly varying with index α > 0. de Haan (1984), Stoev (2008), Kabluchko (2009)

8 8 2. The extremogram - an analog of the autocorrelation function Davis, M. (2009,2012) For an R d -valued strictly stationary regularly varying sequence (X t ) and a Borel set A bounded away from zero the extremogram is the limiting function ρ A (h) = lim x P(x 1 X h A x 1 X 0 A) = lim x P(x 1 X 0 A, x 1 X h A) P(x 1 X 0 A) = µ h+1(a R d(h 1) 0 A) µ h+1 (A R dh 0 ), h 0.

9 Since cov(i {x 1 X 0 A}, I {x 1 X h A}) P(x 1 X 0 A) = P(x 1 X h A x 1 X 0 A) P(x 1 X 0 A) 9 ρ A (h), h 0, (ρ A (h)) is the autocorrelation function of a stationary process. One can use the notions of classical time series analysis to describe the extremal dependence structure in a strictly stationary sequence.

10 10 Examples. Take A = B = (1, ). Tail dependence function ρ A (h) = lim x P(X h > x X 0 > x). The AR(1) process X t = φ X t 1 + Z t with iid symmetric regularly varying noise (Z t ) with index α and φ ( 1, 1) has the extremogram γ AA (h) = max(0, (sign(φ)) h φ αh ). Short serial extremal dependence The extremogram of a GARCH(1, 1) process is not very explicit, but γ AA (h) decays exponentially fast to zero. This is in agreement with the geometric β-mixing property of GARCH. Short serial extremal dependence

11 The stochastic volatility model with stationary Gaussian 11 (log σ t ) and iid regularly varying (Z t ) with index α > 0 has extremogram γ AA (h) = 0 as in the iid case. No serial extremal dependence The extremogram of a linear Gaussian process with index α > 0 has extremogram γ AA (h) = 0 as in the iid case. No serial extremal dependence

12 12 The sample extremogram an analog of the sample autocorrelation function. (X t ) regularly varying, m = m n and m n /n 0. The sample extremogram ρ A (h) = m n estimates the extremogram n h t=1 I {a 1 m X t+h A,a 1 m X t A} m n n t=1 I {a 1 m X t A} = γ A(h) γ A (0) ρ A (h) = lim n P(x 1 X h A x 1 X 0 A). m and m/n 0 needed for consistency. Pre-asymptotic central limit theory with rate n/m applies if (X t ) is strongly mixing. Asymptotic covariance matrix is not tractable.

13 These results do not follow from classical time series analysis: 13 the sequences (I {a 1 m X t A} ) t n constitute a triangular array of rowwise stationary sequences. The quantities a m are high thresholds, e.g. P( X 0 > a m ) m 1 which typically have to be replaced by empirical quantiles. Confidence bands are based on permutations of the data or on the stationary bootstrap Politis and Romano (1994).

14 14 extremogram lag Figure 3. Ratio sample extremogram with A = B = (1, ) for 5 minute returns of USD-DEM foreign exchange rates. The extremogram alternates between large values at even lags and small ones at odd lags. This is an indication of AR behavior with negative leading coefficient.

15 15 extremogram extremogram lag lag Figure 4. The sample extremogram for the lower tail of the FTSE (top left), S&P500 (top right), DAX (bottom left) and Nikkei. The bold lines represent sample extremograms based on random permutations of the data.

16 16 extremogram extremogram lag lag Figure 5. Left: 95% bootstrap confidence bands for pre-asymptotic extremogram of 6440 daily FTSE log-returns. Mean block size 200. Right: For the residuals of a fitted GARCH(1, 1) model.

17 Cross-extremogram. 17 Consider a strictly stationary bivariate regularly varying time series ((X t, Y t )) t Z. For two sets A and B bounded away from 0, the cross-extremogram γ AB (h) = lim x P(Y h x B X 0 x A), h 0, is an extremogram based on the two-dimensional sets A R and R B. The corresponding sample cross-extremogram for the time series ((X t, Y t )) t Z : ρ A,B (h) = n h t=1 I {Y t+h a m,y B,X t a m,x A} n t=1 I {X t a m,x A}.

18 18 The extremogram of return times between rare events. We say that X t is extreme if X t xa for a set A bounded away from zero and large x. If the return times were truly iid, the successive waiting times between extremes should be iid geometric. The corresponding return times extremogram ρ A (h) = lim x P(X 1 xa,..., X h 1 xa, X h xa X 0 xa) = µ h+1(a (A c ) h 1 A) µ h+1 (A R dh 0 ), h 0. The return times sample extremogram n h t=1 ρ A (h) = I {X t+h a m A,X t+h 1 a m A,...,X t+1 a m A,X t a m A} n t=1 I, h < n. {X t a m A}

19 return_time return_time Figure 6. Left: Return times sample extremogram for extreme events with A = R\[ξ 0.05, ξ 0.95 ] for the daily log-returns of BAC using bootstrapped confidence intervals (dashed lines), geometric probability mass function (light solid). Right: The corresponding extremogram for the residuals of a fitted GARCH(1,1) model (right).

20 20 3. Frequency domain analysis M. and Zhao (2012,2013) The extremogram for a given set A bounded away from zero ρ A (h) = lim n P(x 1 X h A x 1 X 0 A), h 0, is an autocorrelation function. Therefore one can define the spectral density for λ (0, π): f A (λ) = cos(λ h) ρ A (h) = h=1 h= e i λ h ρ A (h). and its sample analog: the periodogram for λ (0, π): f na (λ) = I m na(λ) P m (A) = n n t=1 e itλ I {a 1 m X t A} 2 m n n t=1 I. {a 1 m X t A}

21 One has EI na (λ)/µ 1 (A) f A (λ) for λ (0, π). 21 As in classical time series analysis, fna (λ) is not a consistent estimator of f A (λ): for distinct (fixed or Fourier) frequencies λ j, and iid standard exponential E j, ( f d na (λ j )) j=1,...,h (fa (λ j )E j ) j=1,...,h. ARMA Spectral density Periodogram Frequency Figure 7. Sample extremogram and periodogram for ARMA(1,1) process with student(4) noise. A = (1, )

22 22 Smoothed versions of the periodogram converge to f(λ): If w n (j) 0, j s n, s n /n 0, j s n w n (j) = 1 and j s n w 2 n (j) 0 (e.g. w n(j) = 1/(2s n + 1)) then for any distinct Fourier frequencies λ j such that λ j λ, j s n w n (j) f na (λ j ) P f A (λ), λ (0, π).

23 23 Extremogram Periodogram Upper Bound Bank of America Lower Bound Lag Frequency Figure 8. Sample extremogram and smoothed periodogram for BAC 5 minute returns. The end-of-the day effects cannot be seen in the corresponding sample autocorrelation function.

24 24 4. The integrated periodogram The integrated periodogram J na (λ) = λ 0 I na (x) g(x) dx, λ Π = [0, π]. for a non-negative weight function g is an estimator of the weighted spectral distribution function J na (λ) P J A (λ) = λ 0 f A (x) g(x) dx, λ Π. Goal. Use the integrated periodogram for judging whether the extremes in a time series fit a given model. Goodness-of-fit tests are based on functional central limit theorems in C(Π):

25 ( n ) 0.5[JnA EJ na ] m = ( n ) 0.5 [ n 1 ψ 0 [ γ A (0) E γ A (0)] + 2 ψ h [ γ A (h) E γ A (h)] ] m h=1 d ψ 0 Z ψ h Z h = G, h=1 where (Z h ) is a dependent Gaussian sequence and ψ h (λ) = λ Grenander-Rosenblatt test: 0 cos(h x) g(x) dx, λ Π. 25 (n/m) 0.5 d sup J na (λ) EJ na (λ) sup G(λ). x Π x Π ω 2 - or Cramér-von Mises test: (n/m) (J na (λ) EJ na (λ)) 2 dλ d G 2 (λ) dλ. λ Π λ Π

26 26 Limit theory is pre-asymptotic. The distribution of G is not tractable, but the stationary bootstrap allows one to approximate it. The theory works for the Riemann sum approximation at the Fourier frequencies of the integrated periodogram. Example. If (X t ) is iid or a simple stochastic volatility model then Z h = 0 for h 1 and the limit process collapses to G = ψ 0 Z 0. But in this case n 0.5[ (J na EJ na ) ψ 0 ( γ A (0) E γ A (0)) ] 2 ψ h Z h, for iid (Z h ). For g 1, ψ h (λ) = sin(hλ)/h and limit becomes a Brownian bridge on Π. h=1

27 The method can, hopefully, be extended to Whittle estimation based on the extremes of a time series, e.g. for max-stable stationary processes. 27