An Introduction to Statistical Modeling of Extreme V (llues

Transcription

1 Stuart Coles An Introduction to Statistical Modeling of Extreme V (llues With 77 Illustrations, Springer

2 Stuart Coles Department of Mathematics University of Bristol University Walk Bristol BS81TW UK British library Cataloguing in Publication Data Coles, Stuart An introduction to statistical modeling of extreme values.. (Springer series in statistics) I. Extreme value theory. 2. Mathematical statistics I. Title ISBN library of Congress Cataloging-in-Publication Data Coles, Stuart. An introduction to statistical modeling of extreme values. / Stuart Coles. p. cm. -- (Springer series in statistics) Includes bibliographical references and index. ISBN ISBN (ebook) DOI / I. Extreme value theory. I. Title. II. Series. QA273.6.C '~c Apart from any fair dealing for the purposes of research or private study, or criticism or review, as pennitted under the Copyright, Designs and Patents Act 1988, this publication may only be reproduced, stored or transmitted, in any fonn or by any means, with the prior pennission in writing of the publishers, or in the case of reprographic reproduction in accordance with the terms of licences issued by the Copyright licensing Agency. Enquiries concerning reproduction outside those terms should be sent to the publishers. ISBN springeroniine.com Springer-Verlag London 2001 Originally published by Springer-Verlag London Berlin Heidelberg in 2001 Softcover reprint of the hardcover 1 st edition rd printing 2004 The use of registered names, trademarks etc. in this publication does not imply, even in the absence of a specific statement, that such names are exempt from the relevant laws and regulations and therefore free for general use. The publisher makes no representation, express or implied, with regard to the accuracy of the infonnation contained in this book and cannot accept any legal responsibility or liability for any errors or omissions that may be made. Typesetting: Camera ready by the author 12/ Printed on acid-free paper SPIN

3 To Ben and Jodie

4 Preface Extreme value theory is unique as a statistical discipline in that it develops techniques and models for describing the unusual rather than the usual. As an abstract study of random phenomena, the subject can be traced back to the early part of the 20th century. It was not until the 1950's that the methodology was proposed in any serious way for the modeling of genuine physical phenomena. It is no coincidence that early applications of extreme value models were primarily in the field of civil engineering: engineers had always been required to design their structures so that they would withstand the forces that might reasonably be expected to impact upon them. Extreme value theory provided a framework in which an estimate of anticipated forces could be made using historical data. By definition, extreme values are scarce, meaning that estimates are often required for levels of a process that are much greater than have already been observed. This implies an extrapolation from observed levels to unobserved levels, and extreme value theory provides a class of models to enable such extrapolation. In lieu of an empirical or physical basis, asymptotic argument is used to generate the extreme value models. It is easy to be cynical about this strategy, arguing that extrapolation of models to unseen levels requires a leap of faith, even if the models have an underlying asymptotic rationale. There is no simple defense against this criticism, except to say that applications demand extrapolation, and that it is better to use techniques that have a rationale of some sort. This argument is well understood and, notwithstanding objections to the general principle of extrapolation, there are no serious competitor models to those provided by extreme value theory. But there is less common agreement about the vii

5 V III Preface statistical methodology with which to infer such models. In this book we adopt a likelihood-based approach, arguing that this affords a framework in which models can be adapted to the types of non-homogeneous patterns of extreme value variation observed in genuine datasets. Other advantages include the ease with which all relevant information can be incorporated into an inference and the facility to quantify uncertainties in estimation. There are many excellent texts on extreme value theory, covering both prohabilistic and statistical aspects. Among these, Gumbel's Statistics of Extremes was pivotal in promoting extreme value theory as a tool for modeling the extremal behavior of observed physical processes. Of different emphasis, but similar impact, is Extremes and Related Properties of Random Sequences and Processes by Leadbetter, Lindgren and Rootzen. Their arguments greatly advanced the applicability of extreme value techniques in two fundamental ways: first, by the relaxation of classical arguments from independent variables to stationary sequences; second, by the development of broader characterizations of extremal behavior than had previously been given. The aim of the present text is to complement the earlier works with a contemporary statistical view of the discipline. This book is intended for both statisticians and non-statisticians alike. It is hoped, in particular, that it will appeal to practitioners of extreme value modeling with limited statistical expertise. The mathematical level is elementary, and detailed mathematical proof is usually sacrificed in favor of heuristic argument.. Rather more attention is paid to statistical detail, and many examples are provided by way of illustration. All the computations were carried out using the S-PLUS statistical software program, and corresponding datasets and functions are available via the internet as explained in the Appendix. A wide variety of examples of extreme value problems and datasets are described in Chapter 1. These are drawn from different fields - oceanography, wind engineering and finance, amongst others - and are used to illustrat.e the various modeling procedures in subsequent chapters. Chapter 2 gives a brief introduction to general techniques of statistical modeling. This chapter could be skipped by readers with a reasonable statistical knowledge. The heart of the book is contained in Chapters 3 to 8. These chapters include the classical block maxima models for extremes, threshold exceedance models, extensions to stationary and non-stationary sequences, a point process modeling framework and multivariate extreme value models. Chapter 9 provides a brief introduction to a number of more advanced topics, including Bayesian inference and spatial extremes. The book has developed from introductory courses on extremes given at the universities of Lancaster, Bristol, Padova and Lausanne (EPFL). I wrote the first draft of the book while on sabbatical at the University of Padova, and would like to thank especially Paola Bortot for sharing many happy days with me and for inspiring me to work on the book. Thanks

6 Preface IX are also due to many other people. First and foremost, Jonathan Tawn, for teaching me extreme value theory and for being patient with me when I was slow to learn. I'd like also to acknowledge Richard Smith, both for his direct encouragement, and also for initiating an approach to extreme value modeling that emphasizes the role of contemporary statistical techniques. It is largely the fruits of this methodology that I have tried to set out in this book. Both Richard and Jonathan have also been generous in allowing me to use their own datasets in this book: the data of Examples 1.1, 1.3 and 1.4 were provided by Jonathan; those of Examples 1.2, 1.7 and 1.5 by Richard. I'm grateful also to Jan Heffernan for developing some of the S-PLUS functions used in Chapter 8. The list of people who have helped me in less tangible ways is too long to include here, but I should mention in particular my former colleagues from Lancaster University - Peter Diggle, Mandy Chetwynd, Joe Whittaker and Julia Kelsall amongst others - my former Ph.D. students - Elwyn Powell, Ed Casson, Roberto Iannaccone and Francesco Pauli - and my long-term friends - Katherine Fielding and Dave Walshaw. Finally, the book was carefully read by Anthony Davison, whose very detailed comments have enabled me (hopefully) to improve beyond recognition the version he was subjected to. Stuart Coles Bristol

7 Contents 1 Introduction 1.1 Basic Concepts 1.2 Examples Structure of the Book 1.4 Further Reading Basics of Statistical Modeling 2.1 Introduction Basic Statistical Concepts Random Variables and Their Distributions Families of Models 2.3 Multivariate Distributions Random Processes Stationary Processes Markov Chains Limit Laws Parametric Modeling The Parametric Framework Principles of Estimation Maximum Likelihood Estimation Approximate Normality of the Maximum Likelihood Estimator Xl

8 Xli Contents Approximate Inference Using the Deviance Function Inference Using the Profile Likelihood Function Model Diagnostics Example Further Reading Classical Extreme Value Theory and Models Asymptotic Models Model Formulation Extremal Types Theorem The Generalized Extreme Value Distribution Outline Proof of the Extremal Types Theorem Examples Asymptotic Models for Minima Inference for the GEV Distribution General Considerations., Maximum Likelihood Estimation Inference for Return Levels Profile Likelihood Model Checking Examples Annual Maximum Sea-levels at Port Pirie Glass Fiber Strength Example Model Generalization: the r Largest Order Statistic Model Model Formulation Modeling the r Largest Order Statistics Venice Sea-level Data Further Reading Threshold Models Introduction Asymptotic Model Characterization The Generalized Pareto Distribution Outline Justification for the Generalized Pareto Model Examples Modeling Threshold Excesses Threshold Selection Parameter Estimation Return Levels Threshold Choice Revisited Model Checking Examples Daily Rainfall Data Dow Jones Index Series Further Reading

9 Contents Xlll 5 Extremes of Dependent Sequences Introduction Maxima of Stationary Sequences Modeling Stationary Series Models for Block Maxima Threshold Models Wooster Temperature Series Dow J ones Index Series Further Reading Extremes of Non-stationary Sequences Model Structures Inference Parameter Estimation Model Choice Model Diagnostics Examples III Annual Maximum Sea-levels. III Race Time Data ll Venice Sea-level Data ll Daily Rainfall Data ll Wooster Temperature Data ll9 6.4 Further Reading A Point Process Characterization of Extremes Introduction Basic Theory of Point Processes A Poisson Process Limit for Extremes Convergence Law Examples Connections with Other Extreme Value Models Statistical Modeling Connections with Threshold Excess Model Likelihood Wooster Temperature Series Return Level Estimation r Largest Order Statistic Model Further Reading Multivariate Extremes Introduction Componentwise Maxima Asymptotic Characterization Modeling Example: Annual Maximum Sea-levels Structure Variables. 150

10 xiv Contents 8.3 Alternative Representations Bivariate Threshold Excess Model Point Process Model Examples Asymptotic Independence 8.5 Further Reading Further Topics Bayesian Inference General Theory Bayesian Inference of Extremes Example: Port Pirie Annual Maximum Sea-levels Extremes of Markov Chains Spatial Extremes Max-stable Processes Latent Spatial Process Models Further Reading A Computational Aspects 185 References 195 Index 205