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Black swans or dragon kings? A simple test for deviations from the power law

Author

Listed:
  • Joanna Janczura
  • Rafal Weron

Abstract

We develop a simple test for deviations from power law tails, which is based on the asymptotic properties of the empirical distribution function. We use this test to answer the question whether great natural disasters, financial crashes or electricity price spikes should be classified as dragon kings or 'only' as black swans.

Suggested Citation

  • Joanna Janczura & Rafal Weron, 2011. "Black swans or dragon kings? A simple test for deviations from the power law," Papers 1102.3712, arXiv.org.
    • Handle: RePEc:arx:papers:1102.3712
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    File URL: http://arxiv.org/pdf/1102.3712
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    Cited by:

    1. Marek Teuerle & Piotr Zebrowski & Marcin Magdziarz, 2011. "Multidimensional Levy walk and its scaling limits," HSC Research Reports HSC/11/06, Hugo Steinhaus Center, Wroclaw University of Science and Technology.
    2. Joanna Janczura & Sebastian Orzel & Agnieszka Wylomanska, 2011. "Subordinated alpha-stable Ornstein-Uhlenbeck process as a tool for financial data description," HSC Research Reports HSC/11/03, Hugo Steinhaus Center, Wroclaw University of Science and Technology.
    3. Wylomanska-, Agnieszka, 2010. "Measures of dependence for Ornstein-Uhlenbeck processes with tempered stable distribution," MPRA Paper 28535, University Library of Munich, Germany, revised 2010.

    More about this item

    JEL classification:

    • C16 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Econometric and Statistical Methods; Specific Distributions
    • C12 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Hypothesis Testing: General
    • Q47 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy Forecasting
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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