Oorschot, J. and Zhou, C. (2021). TAIL DEPENDENCE OF OLS Econometric Theory, 38(2):273--300.
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Affiliated authorsJochem Oorschot, Chen Zhou
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Publication year2021
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JournalEconometric Theory
This paper shows that if the errors in a multiple regression model are heavy-tailed, the ordinary least squares (OLS) estimators for the regression coefficients are tail-dependent. The tail dependence arises, because the OLS estimators are stochastic linear combinations of heavy-tailed random variables. Moreover, tail dependence also exists between the fitted sum of squares (FSS) and the residual sum of squares (RSS), because they are stochastic quadratic combinations of heavy-tailed random variables.