Extremile Regression

Abstract

Regression extremiles define a least squares analogue of regression quantiles. They are determined by weighted expectations rather than tail probabilities. Of special interest is their intuitive meaning in terms of expected minima and maxima. Their use appears naturally in risk management where, in contrast to quantiles, they fulfill the coherency axiom and take the severity of tail losses into account. In addition, they are comonotonically additive and belong to both the families of spectral risk measures and concave distortion risk measures. This paper provides the first detailed study exploring implications of the extremile terminology in a general setting of presence of covariates. We rely on local linear (least squares) check function minimization for estimating conditional extremiles and deriving the asymptotic normality of their estimators. We also extend extremile regression far into the tails of heavy-tailed distributions. Extrapolated estimators are constructed and their asymptotic theory is developed. Some applications to real data are provided.

Keywords

Replaces

Abdelaati Daouia, Irene Gijbels, and Gilles Stupfler, “Extremile Regression”, TSE Working Paper, n. 21-1176, January 2021.

Reference

Abdelaati Daouia, Irene Gijbels, and Gilles Stupfler, “Extremile Regression”, Journal of the American Statistical Association, vol. 117, n. 539, 2022, pp. 1579–1586.