Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/248306 
Year of Publication: 
2021
Series/Report no.: 
Bank of Canada Staff Working Paper No. 2021-45
Publisher: 
Bank of Canada, Ottawa
Abstract: 
Scaling behavior measured in cross-sectional studies through the tail index of a power law is prone to a bias. This hampers inference; in particular, time variation in estimated tail indices may be erroneous. In the case of a linear factor model, the factor biases the tail indices in the left and right tail in opposite directions. This fact can be exploited to reduce the bias. We show how this bias arises from the factor, how to remedy for the bias and how to apply our methods to financial data and geographic location data.
Subjects: 
Econometric and statistical methods
JEL: 
C01
C14
C58
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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