Tail Index Estimation for Discrete Heavy-Tailed Distributions

TL;DR

This paper introduces a new estimator for the tail index of discrete heavy-tailed distributions, extending it to Markov chains, with theoretical guarantees and simulation validation.

Contribution

It proposes a Hill-type estimator for discrete heavy-tailed distributions and extends it to regenerative Markov chains, with non-asymptotic bounds and asymptotic properties.

Findings

Estimator is consistent and asymptotically normal.

Non-asymptotic deviation bounds are established.

Simulation results support the estimator's effectiveness.

Abstract

It is the purpose of this paper to investigate the issue of estimating the regularity index $\beta>0$ of a discrete heavy-tailed r.v. $S$, \textit{i.e.} a r.v. $S$ valued in $\mathbb{N}^*$ such that $\mathbb{P}(S>n)=L(n)\cdot n^{-\beta}$ for all $n\geq 1$, where $L:\mathbb{R}^*_+\to \mathbb{R}_+$ is a slowly varying function. As a first go, we consider the situation where inference is based on independent copies $S_1,\; \ldots,\; S_n$ of the generic variable $S$. Just like the popular Hill estimator in the continuous heavy-tail situation, the estimator $\widehat{\beta}$ we propose can be derived by means of a suitable reformulation of the regularly varying condition, replacing $S$'s survivor function by its empirical counterpart. Under mild assumptions, a non-asymptotic bound for the deviation between $\widehat{\beta}$ and $\beta$ is established, as well as limit results (consistency and asymptotic normality). Beyond the i.i.d. case, the inference method proposed is extended to the estimation of the regularity index of a regenerative $\beta$-null recurrent Markov chain. Since the parameter $\beta$ can be then viewed as the tail index of the (regularly varying) distribution of the return time of the chain $X$ to any (pseudo-) regenerative set, in this case, the estimator is constructed from the successive regeneration times. Because the durations between consecutive regeneration times are asymptotically independent, we can prove that the consistency of the estimator promoted is preserved. In addition to the theoretical analysis carried out, simulation results provide empirical evidence of the relevance of the inference technique proposed.