Alfarano, Simone and Lux, Thomas (2010): Extreme Value Theory as a Theoretical Background for Power Law Behavior.
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Power law behavior has been recognized to be a pervasive feature of many phenomena in natural and social sciences. While immense research efforts have been devoted to the analysis of behavioral mechanisms responsible for the ubiquity of power-law scaling, the strong theoretical foundation of power laws as a very general type of limiting behavior of large realizations of stochastic processes is less well known. In this chapter, we briefly present some of the key results of extreme value theory, which provide a statistical justification for the emergence of power laws as limiting behavior for extreme fluctuations. The remarkable generality of the theory allows to abstract from the details of the system under investigation, and therefore allows its application in many diverse fields. Moreover, this theory offers new powerful techniques for the estimation of the Pareto index, detailed in the second part of this chapter.
|Item Type:||MPRA Paper|
|Original Title:||Extreme Value Theory as a Theoretical Background for Power Law Behavior|
|Keywords:||Extreme Value Theory; Power Laws; Tail index|
|Subjects:||C - Mathematical and Quantitative Methods > C1 - Econometric and Statistical Methods and Methodology: General > C13 - Estimation: General
C - Mathematical and Quantitative Methods > C1 - Econometric and Statistical Methods and Methodology: General > C14 - Semiparametric and Nonparametric Methods: General
C - Mathematical and Quantitative Methods > C0 - General > C01 - Econometrics
|Depositing User:||Simone Alfarano|
|Date Deposited:||30. Aug 2010 19:30|
|Last Modified:||15. Feb 2013 21:43|
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