monotste

Fisher-Tippett theorem and limiting distribution for the maximum

Tomorrow, we will discuss Fisher-Tippett theorem. The idea is that there are only three possible limiting distributions for normalized versions of the maxima of i.i.d. samples http://freakonometrics.blog.free.fr/public/perso5/max-00.gif. For bounded distribution, consider e.g. the uniform distribution on the unit interval, i.e. http://freakonometrics.blog.free.fr/public/perso5/max-09.gif on the unit interval. Let http://freakonometrics.blog.free.fr/public/perso5/max-10.gif and http://freakonometrics.blog.free.fr/public/perso5/max-11.gif. Then, for all http://freakonometrics.blog.free.fr/public/perso5/max-12.gif and http://freakonometrics.blog.free.fr/public/perso5/max-13.gif,

http://freakonometrics.blog.free.fr/public/perso5/max-14.gif

i.e. the limiting distribution of the maximum is Weibull's.

set.seed(1)
s=1000000
n=100
M=matrix(runif(s),n,s/n)
V=apply(M,2,max)
bn=1
an=1/n
U=(V-bn)/an
hist(U,probability=TRUE,,col="light green",
xlim=c(-7,1),main="",breaks=seq(-20,10,by=.25))
u=seq(-10,0,by=.1)
v=exp(u)
lines(u,v,lwd=3,col="red")

For heavy tailed distribution, or Pareto-type tails, consider Pareto samples, with distribution function http://freakonometrics.blog.free.fr/public/perso5/max-05.gif. Let http://freakonometrics.blog.free.fr/public/perso5/max-06.gif and http://freakonometrics.blog.free.fr/public/perso5/max-07.gif, then

http://freakonometrics.blog.free.fr/public/perso5/max-08.gif

which means that the limiting distribution is Fréchet's.

set.seed(1)
s=1000000
n=100
M=matrix((runif(s))^(-1/2),n,s/n)
V=apply(M,2,max)
bn=0
an=n^(1/2)
U=(V-bn)/an
hist(U,probability=TRUE,col="light green",
xlim=c(0,7),main="",breaks=seq(0,max(U)+1,by=.25))
u=seq(0,10,by=.1)
v=dfrechet(u,shape=2)
lines(u,v,lwd=3,col="red")

For light tailed distribution, or exponential tails, consider e.g. a sample of exponentially distribution variates, with common distribution function http://freakonometrics.blog.free.fr/public/perso5/max-01.gif. Let http://freakonometrics.blog.free.fr/public/perso5/max-02.gif and http://freakonometrics.blog.free.fr/public/perso5/max-03.gif, then

http://freakonometrics.blog.free.fr/public/perso5/max-04.gif

i.e. the limiting distribution for the maximum is Gumbel's distribution.

library(evd)
set.seed(1)
s=1000000
n=100
M=matrix(rexp(s,1),n,s/n)
V=apply(M,2,max)
(bn=qexp(1-1/n))
log(n)
an=1
U=(V-bn)/an
hist(U,probability=TRUE,col="light green",
xlim=c(-2,7),ylim=c(0,.39),main="",breaks=seq(-5,15,by=.25))
u=seq(-5,15,by=.1)
v=dgumbel(u)
lines(u,v,lwd=3,col="red")

Consider now a Gaussian http://freakonometrics.blog.free.fr/public/perso5/max-17.gif sample. We can use the following approximation of the cumulative distribution function (based on l'Hopital's rule)

http://freakonometrics.blog.free.fr/public/perso5/max-15.gif

as http://freakonometrics.blog.free.fr/public/perso5/max-16.gif. Let http://freakonometrics.blog.free.fr/public/perso5/max-18.gif and http://freakonometrics.blog.free.fr/public/perso5/max-19.gif. Then we can get

http://freakonometrics.blog.free.fr/public/perso5/max-20.gif

as http://freakonometrics.blog.free.fr/public/perso5/max-21.gif. I.e. the limiting distribution of the maximum of a Gaussian sample is Gumbel's. But what we do not see here is that for a Gaussian sample, the convergence is extremely slow, i.e., with 100 observations, we are still far away from Gumbel distribution,

and it is only slightly better with 1,000 observations,

set.seed(1)
s=10000000
n=1000
M=matrix(rnorm(s,0,1),n,s/n)
V=apply(M,2,max)
(bn=qnorm(1-1/n,0,1))
an=1/bn
U=(V-bn)/an
hist(U,probability=TRUE,col="light green",
xlim=c(-2,7),ylim=c(0,.39),main="",breaks=seq(-5,15,by=.25))
u=seq(-5,15,by=.1)
v=dgumbel(u)
lines(u,v,lwd=3,col="red")

Even worst, consider lognormal observations. In that case, recall that if we consider (increasing) transformation of variates, we are in the same domain of attraction. Hence, since http://freakonometrics.blog.free.fr/public/perso5/max-22.gif, if

http://freakonometrics.blog.free.fr/public/perso5/max-23.gif

then

http://freakonometrics.blog.free.fr/public/perso5/max-24.gif

i.e. using Taylor's approximation on the right term,

http://freakonometrics.blog.free.fr/public/perso5/max-25.gif

This gives us normalizing coefficients we should use here.

set.seed(1)
s=10000000
n=1000
M=matrix(rlnorm(s,0,1),n,s/n)
V=apply(M,2,max)
bn=exp(qnorm(1-1/n,0,1))
an=exp(qnorm(1-1/n,0,1))/(qnorm(1-1/n,0,1))
U=(V-bn)/an
hist(U,probability=TRUE,col="light green",
xlim=c(-2,7),ylim=c(0,.39),main="",breaks=seq(-5,40,by=.25))
u=seq(-5,15,by=.1)
v=dgumbel(u)
lines(u,v,lwd=3,col="red")


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