Abstract

It is often critical to accurately model the upper tail behaviour of a random process. Nonparametric density estimation methods are commonly implemented as exploratory data analysis techniques for this purpose and can avoid model specification biases implied by using parametric estimators. In particular, kernel-based estimators place minimal assumptions on the data, and provide improved visualisation over scatterplots and histograms. However kernel density estimators can perform poorly when estimating tail behaviour above a threshold, and can over-emphasise bumps in the density for heavy tailed data. We develop a transformation kernel density estimator which is able to handle heavy tailed and bounded data, and is robust to threshold choice.Wederive closed form expressions for its asymptotic bias and variance, which demonstrate its good performance in the tail region. Finite sample performance is illustrated in numerical studies, and in an expanded analysis of the performance of globalclimate models.