Box-Cox Transformations and Bias Reduction in Extreme Value Theory

Abstract

The Box-Cox transformations are used to make the data more suitable for statistical analysis. We know from the literature that this transformation of the data can increase the rate of convergence of the tail of the distribution to the generalized extreme value distribution, and as a byproduct, the bias of the estimation procedure is reduced. The reduction of bias of the Hill estimator has been widely addressed in the literature of extreme value theory. Several techniques have been used to achieve such reduction of bias, either by removing the main component of the bias of the Hill estimator of the extreme value index (EVI) or by constructing new estimators based on generalized means or norms that generalize the Hill estimator. We are going to study the Box-Cox Hill estimator introduced by Teugels and Vanroelen, in 2004, proving the consistency and asymptotic normality of the estimator and addressing the choice and estimation of the power and shift parameters of the Box-Cox transformation for the EVI estimation. The performance of the estimators under study will be illustrated for finite samples through small-scale Monte Carlo simulation studies.

The PORTSEA (Portuguese School of Extremes and Applications) and a few personal scientific achievements

“…The problem of bias reduction was also addressed in [285], by Henriques-Rodrigues and Gomes, where special emphasis was given to the role of Box-Cox transformations in the reduction of bias.…”