Heavy-tailed distribution

In probability theory, heavy-tailed distributions are probability distributions whose tails are not exponentially bounded: that is, they have heavier tails than the exponential distribution. In many applications it is the right tail of the distribution that is of interest, but a distribution may have a heavy left tail, or both tails may be heavy. There are three important subclasses of heavy-tailed distributions: the fat-tailed distributions, the long-tailed distributions, and the subexponential distributions. In practice, all commonly used heavy-tailed distributions belong to the subexponential class, introduced by Jozef Teugels. There is still some discrepancy over the use of the term heavy-tailed. There are two other definitions in use. Some authors use the term to refer to those distributions which do not have all their power moments finite; and some others to those distributions that do not have a finite variance. The definition given in this article is the most general in use, and includes all distributions encompassed by the alternative definitions, as well as those distributions such as log-normal that possess all their power moments, yet which are generally considered to be heavy-tailed. (Occasionally, heavy-tailed is used for any distribution that has heavier tails than the normal distribution.) The distribution of a random variable X with distribution function F is said to have a heavy (right) tail if the moment generating function of X, MX(t), is infinite for all t > 0. That means This is also written in terms of the tail distribution function as The distribution of a random variable X with distribution function F is said to have a long right tail if for all t > 0, or equivalently This has the intuitive interpretation for a right-tailed long-tailed distributed quantity that if the long-tailed quantity exceeds some high level, the probability approaches 1 that it will exceed any other higher level. All long-tailed distributions are heavy-tailed, but the converse is false, and it is possible to construct heavy-tailed distributions that are not long-tailed.

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