Dynamic mixture distributions are convenient models for highly skewed and heavy-tailed data. However, estimation has proved to be challenging and computationally expensive. To address this issue, we develop a more parsimonious model, based on a one-parameter weight function given by the exponential cumulative distribution function. Parameter estimation is carried out via maximum likelihood, approximate maximum likelihood and noisy cross-entropy. Simulation experiments and real-data analyses suggest that approximate maximum likelihood is the best method in terms of RMSE, albeit at a high computational cost. With respect to the version of the dynamic mixture with weight equal to the two-parameter Cauchy cumulative distribution function, the reduced flexibility of the present model is more than compensated by better statistical and computational properties.

A parsimonious dynamic mixture for heavy-tailed distributions / Bee, Marco. - In: MATHEMATICS AND COMPUTERS IN SIMULATION. - ISSN 0378-4754. - 2024, 230:(2024), pp. 193-206. [10.1016/j.matcom.2024.11.011]

A parsimonious dynamic mixture for heavy-tailed distributions

Bee, Marco
2024-01-01

Abstract

Dynamic mixture distributions are convenient models for highly skewed and heavy-tailed data. However, estimation has proved to be challenging and computationally expensive. To address this issue, we develop a more parsimonious model, based on a one-parameter weight function given by the exponential cumulative distribution function. Parameter estimation is carried out via maximum likelihood, approximate maximum likelihood and noisy cross-entropy. Simulation experiments and real-data analyses suggest that approximate maximum likelihood is the best method in terms of RMSE, albeit at a high computational cost. With respect to the version of the dynamic mixture with weight equal to the two-parameter Cauchy cumulative distribution function, the reduced flexibility of the present model is more than compensated by better statistical and computational properties.
2024
Bee, Marco
A parsimonious dynamic mixture for heavy-tailed distributions / Bee, Marco. - In: MATHEMATICS AND COMPUTERS IN SIMULATION. - ISSN 0378-4754. - 2024, 230:(2024), pp. 193-206. [10.1016/j.matcom.2024.11.011]
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Utilizza questo identificativo per citare o creare un link a questo documento: https://hdl.handle.net/11572/438290
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