2024/12/13 CRETA Seminar - Extremal quantiles under two-way clustering

Title：

2024/12/13 CRETA Seminar - Extremal quantiles under two-way clustering

Introduction：

This paper investigates extremal quantiles under two-way clustering dependence. We demonstrate that the limiting distribution of the unconditional intermediate order quantiles in the tails converges to a Gaussian distribution. This is remarkable as two-way cluster dependence entails potential non-Gaussianity in general, but extremal quantiles do not suffer from this issue even in degenerate cases. Building upon this result, we extend our analysis to extremal quantile regressions of intermediate order.  Simulation evidence supports our theoretical findings. An empirical application based on Adrian et al (2022) is provided.