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

Janczura, Joanna and Weron, Rafal (2011): Black swans or dragon kings? A simple test for deviations from the power law.

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.

• Item Type: MPRA Paper
• Language: English
• Keywords: black swan; dragon king; outlier; power law; natural disaster; financial crash; price spike
• Subjects: C - Mathematical and Quantitative Methods > C1 - Econometric and Statistical Methods and Methodology: General > C12 - Hypothesis Testing: General; Q - Agricultural and Natural Resource Economics ; Environmental and Ecological Economics > Q4 - Energy > Q47 - Energy Forecasting; G - Financial Economics > G3 - Corporate Finance and Governance > G32 - Financing Policy ; Financial Risk and Risk Management ; Capital and Ownership Structure ; Value of Firms ; Goodwill

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