Robust and Computationally Efficient Trimmed L-Moments Estimation for Parametric Distributions
By: Chudamani Poudyal, Qian Zhao, Hari Sitaula
Potential Business Impact:
Finds patterns in messy data, ignoring bad numbers.
This paper proposes a robust and computationally efficient estimation framework for fitting parametric distributions based on trimmed L-moments. Trimmed L-moments extend classical L-moment theory by downweighting or excluding extreme order statistics, resulting in estimators that are less sensitive to outliers and heavy tails. We construct estimators for both location-scale and shape parameters using asymmetric trimming schemes tailored to different moments, and establish their asymptotic properties for inferential justification using the general structural theory of L-statistics, deriving simplified single-integration expressions to ensure numerical stability. State-of-the-art algorithms are developed to resolve the sign ambiguity in estimating the scale parameter for location-scale models and the tail index for the Frechet model. The proposed estimators offer improved efficiency over traditional robust alternatives for selected asymmetric trimming configurations, while retaining closed-form expressions for a wide range of common distributions, facilitating fast and stable computation. Simulation studies demonstrate strong finite-sample performance. An application to financial claim severity modeling highlights the practical relevance and flexibility of the approach.
Similar Papers
General Form Moment-based Estimator of Weibull, Gamma, and Log-normal Distributions
Methodology
Finds hidden patterns in numbers more easily.
A Robust and Distribution-Fitting-Free Estimation Approach of Travel Time Percentile Function based on L-moments
Applications
Predicts traffic jams better, even with little data.
Building nonstationary extreme value model using L-moments
Methodology
Better predicts floods and extreme weather.