Heavy-Tailed Distributions: Properties and Tests

Abstract Distributions with heavier-than-exponential tails are studied for describing empirical phenomena. It is argued that the concept of increasing "conditional mean exceedance" provides a reasonable way of describing the heavy-tail phenomenon, and a family of Pareto distributions is shown to represent distributions for which this parameter is linearly increasing. A test is developed and modified so as to be suitable for testing heavy-tailedness, and some graphical procedures are also suggested. KEY WORDS: Heavy-tailed DistributionsDistributionsHypothesis TestsPareto DistributionsMean Residual Lifetime