Ocean Engineering 38 (2011) 1338–1346

Contents lists available at ScienceDirect

Ocean Engineering
journal homepage: www.elsevier.com/locate/oceaneng

A comparison of estimators for the generalised Pareto distribution

Edward B.L. Mackay a,n, Peter G. Challenor b, AbuBakr S. Bahaj c
a
GL Garrad Hassan, St Vincent’s Works, Silverthorne Lane, Bristol BS2 0QD, UK
b
Ocean Observing and Climate Group, National Oceanography Centre, Southampton SO14 3 ZH, UK
c
Sustainable Energy Research Group, University of Southampton, Southampton SO17 1BJ, UK

a r t i c l e i n f o a b s t r a c t

Article history: The generalised Pareto distribution (GPD) is often used to model the distribution of storm peak wave
Received 27 April 2010 heights exceeding a high threshold, from which return values can be calculated. There are large
Accepted 15 June 2011 differences in the performance of various parameter and quantile estimators for the GPD. Commonly
Editor-in-Chief: A.I. Incecik
used estimation methods such as maximum likelihood or probability weighted moments are not
optimal, especially for smaller sample sizes. The performance of several estimators for the GPD is
Keywords: compared by the Monte Carlo simulation and the implications for estimating return values of
Extremes significant wave height are discussed. Of the estimators compared, the likelihood-moment (LM)
Peaks-over-threshold estimator has close to the lowest bias and variance over a wide range of sample sizes and GPD shape
Generalised Pareto distribution
parameters. The LM estimator always exists, is simple to compute and has a low sensitivity to choice of
Estimator
threshold. It is recommended that the LM estimator is used for calculating return values of significant
wave height when the sample size is less than 500. For sample sizes above 500 the NEW estimator of
Zhang and Stephens (2009) can give accurate results for low computational cost.
& 2011 Elsevier Ltd. All rights reserved.

1. Introduction various parameter and quantile estimators can vary greatly in

The peaks-over-threshold (POT) method is commonly used to
estimate return values of significant wave height (e.g. Mathiesen
et al.,1994; Ferreira and Guedes Soares, 1998; Naess, 1998; Caires
and Sterl, 2005). In the POT method a distribution is fitted to the
exceedances of a variable above a high threshold. Results from
extreme value theory show that for any random variable from a
distribution, which satisfies certain regularity conditions, the
distribution of exceedances of a high enough threshold will tend
to a member of the generalised Pareto family (see e.g. Coles, 2001;
Beirlant et al., 2004). This result has led to the generalised Pareto
distribution (GPD) being used in conjunction with the POT
method to estimate return values of environmental variables.
There are numerous factors, which affect the accuracy of
estimates of the estimated return values, such as the length and
accuracy of data available, the criteria used to indentify indepen-
dent storm peaks, the choice of threshold and covariate effects.
In this paper we focus on the effect that the method used to
estimate the parameters of the GPD has on the accuracy of the
estimated return values. This topic has received a great deal of
attention in the statistical literature, but relatively little attention
by the offshore engineering community. The performance of
n
Corresponding author.
E-mail address: ed.mackay@gl-garradhassan.com (E.B.L. Mackay).
terms of their bias, variance and sensitivity to threshold choice,
and consequently affect the accuracy of the estimated return
values.
The most commonly used methods for the GPD used for
estimating return values of significant wave height are maximum
likelihood (ML), the method of moments (MOM) and probability
weighted moments (PWM). Each of these methods has disadvan-
tages, which although well known in statistical literature, have
not been discussed in the offshore engineering literature. For
example, the ML estimators of the GPD parameters are asympto-
tically efficient (as the sample size tends to infinity the ML
estimators achieve the Cramer–Rao lower bound for the variance
of an unbiased estimator). However, Hosking and Wallis (1987)
showed that the ML estimates do not display this asymptotic
property for sample sizes up to 500. They also noted that some-
times the solutions to the ML equations do not exist and that at
other times when the solutions do exist there can be convergence
problems with the algorithm they used to find them. Hosking and
Wallis (1987) introduced the PWM estimators for the GPD and
compared them to the MOM and ML estimators. They showed
that the MOM and PWM estimators have lower bias and variance
than ML estimators for sample sizes less than 500. However, both
the MOM and PWM estimators are sensitive to threshold choice
and sometimes result in non-feasible estimates, in that supports
inferred from the estimates do not contain all the observations
(Dupuis, 1996).

0029-8018/$ - see front matter & 2011 Elsevier Ltd. All rights reserved.
doi:10.1016/j.oceaneng.2011.06.005
 E.B.L. Mackay et al. / Ocean Engineering 38 (2011) 1338–1346
Since the study of Hosking and Wallis there have been
numerous new estimators proposed for the parameters of the
GPD. An extensive discussion of the various methods that have
been proposed has been presented by de Zea Bermudez and Kotz
(2010). Although de Zea Bermudez and Kotz (2010) provide some
guidance on the relative merits of the various methods, they do
not provide a quantitative comparison of the performances using
a simulation study. Many simulation studies have been presented
before (for recent examples see Ashkar and Nwentsa Tatsambon,
2007; Deidda and Puliga, 2009). However, these studies have
either compared only a few estimators or compared more
estimators but for a limited range of sample sizes or GPD shape
parameters. The performance of an estimator can vary consider-
ably with both the sample size and the value of the GPD shape
parameter. Therefore estimators that perform well in some
situations may perform poorly in others. The purpose of this
paper is to make a systematic comparison of the estimators that
have been proposed for the GPD over a wide range of sample sizes
and shape parameters and make practical recommendations for
the most suitable methods for estimation of return values of
significant wave height, Hs (defined as 4 times the standard
deviation of the surface elevation).
The paper is arranged as follows: the generalised Pareto
distribution is defined in Section 2 and an overview of parameter
estimation methods is presented in Section 3. In Section 4, the
performance of the estimators is compared using the Monte Carlo
simulation. The results are discussed in Section 5 and an example
is presented to illustrate the differences in practical situations.
Finally, conclusions are presented in Section 6.
2. The generalised Pareto distribution
Let Y be a random variable and X ¼Y  u be the exceedances of
Y over some high threshold u. Then X has a generalised Pareto
distribution if and only if the distribution function of X, condi-
tional on Y exceeding u, is
(
1ð1 þ xx=sÞ1=x for x a 0
FðxÞ ¼ PrfX r x9Y 4 ug ¼ ð1Þ
1expðx=sÞ for x ¼ 0
where s 40 and for x Z0 the support is 0 rxoN, while for x o0
the support is 0 rxr  s/x. The parameters s and x are called the
scale and shape parameters, respectively. The generalised Pareto
family contains the uniform distribution when x ¼  1 and the
exponential distribution when x ¼0. When x o0 the distribution
has a finite end point and is referred to as short-tailed. When
x 40 the distribution is referred to as heavy-tailed.
The mean and variance of the distribution are given by
s of M1,0,r is preferable to M1,q,0 since the estimators can be
EðXÞ ¼ for x o1
ð1xÞ
and
s2
varðXÞ ¼ for x o 1=2:
ð1xÞ2 ð12xÞ
When x Z1 the mean is not defined and when x Z1/2 the
variance is not defined. In general, for x 40 the rth central
moment exists only if x o1/r.
The N-year return is obtained as the solution of
PrfY 4xN g ¼ 1=Nm, where m is the number of observations per
year. If we define zu ¼ PrfY 4ug, then from Eq. (1) we have
8 h i definition given in Eq. (1). The probability of samples occurring,
< u þ s ðNmz Þx 1 for x a0
x u
xN ¼
: u þ slogðNmz Þ for x ¼ 0
u
1339
3. Methods for estimating GPD parameters
Several estimators have been proposed for the threshold, u, at
which the GPD can be considered a valid model for the data (e.g.
Moharram et al., 1993; Sing and Guo, 1995; Dupuis, 1998). These
methods remove the subjectivity in the choice of threshold, but
do not illustrate whether the GPD can be considered a valid model
for the data. Confirming the validity of the model for the data is of
vital importance if it is to be used to extrapolate outside the range
of observations. Therefore the method preferred by most practi-
tioners is to estimate the scale and shape parameters for a range
of thresholds and examine the variation of certain statistics with
the threshold (see e.g. Coles, 2001). In the following we will
consider estimators for the shape and scale parameters only. Note
that after pre-selection of the threshold u, the three-parameter
GPD is reduced to a two-parameter distribution.
To keep paper to a reasonable length, we have only included
the mathematical details where they are necessary for the
discussion. For information on the numerical implementation of
the methods the reader is referred either to the referenced papers
or to de Zea Bermudez and Kotz (2010) where the majority of the
methods are discussed in detail. Throughout this section we will
denote a sample of n observations from a common population as
x1, y , xn and denote the order statistics as x(1) rx(2) r y rx(n).
3.1. Moment based methods
There are several approaches, which obtain estimators for GPD
parameters using various types of moments of the distribution.
The simplest approach, known as the method of moments (MOM)
obtains estimators by equating the sample mean and variance
with the population mean and variance (Eqs. (2) and (3)) and
rearranging. The use of the MOM estimators implicitly assumes
that x o1/2, since for x Z1/2 the variance is not defined.
Following a similar idea to the method of moments, the
sample probability weighted moments (PWMs) can be equated
with the theoretical PWMs to obtain estimators for the para-
meters. The PWMs of a variable X with distribution function F are
defined as
Z 1
Mp,q,r ¼ EðX p F q ð1FÞr Þ ¼ ½XðFÞp F q ð1FÞr dF: ð5Þ
0
This method was first introduced for the GPD by Hosking and
Wallis (1987), who considered the use of the PWMs M1,0,0 and
M1,0,1. Rasmussen (2001) discussed parameter estimators using
M1,0,r and M1,q,0, where q and r are not restricted to being
non-negative integers, known as generalised probability weighted
moment (GPWM) estimators. Rasmussen concludes that the use
ð2Þ expressed as explicit functions of the data. The optimal values
of r used in the GPWM estimator are defined as a function of the
non-exceedance probability, F, of interest. For the simulations
described in Section 4 a value of F¼0.999 has been used.
ð3Þ Similar to the MOM estimator, the PWM and GPWM estima-
tors assume a restricted parameter space, in that M1,0,r only exists
if r 4 1 and x or þ1. Therefore the PWM estimator assumes that
x o1 and the GPWM estimator assumes x o0.75.
MOM, PWM and GPWM estimators always exist and are easy
to compute. However, they can sometimes produce estimates,
which are not consistent with observed data, in that there are
samples for which x^ is negative and xðnÞ 4s ^ =x^ , violating the
which result in these ‘non-feasible’ parameter estimates, has been
ð4Þ discussed by Dupuis (1996) and Ashkar and Nwentsa Tatsambon
(2007). They show that when x ¼  0.5 about 30% of samples
1340 E.B.L. Mackay et al. / Ocean Engineering 38 (2011) 1338–1346
results in non-feasible parameter estimates, but the occurrence
decreases with increasing x.
Dupuis and Tsao (1998) introduced hybrid-MOM and PWM
estimators, which are always feasible. These hybrid estimators
take the value of the MOM or PWM estimators if the results are
feasible and set x^ ¼ s
^ =xðnÞ otherwise. We will extend this idea to
the GPWM estimate also. In the rest of the paper we will only
consider these hybrid estimators.
Hosking (1990) introduced another type of estimator obtained
by considering expectations of linear combinations of order statis-
tics, known as L-moments. In hydrological studies parameter
estimates are often expressed in terms of L-moments or LH-
moments (higher-order L-moments). However, the L-moments
can be expressed as linear combinations of the PWMs, so they do
not lead to anything new in terms of inference and we will not
consider them further.
3.2. Maximum likelihood
The likelihood function of independent observations x1, y, xn
from Eq. (1) is
Y
n
Lðs, xÞ ¼ f ðxj , s, xÞ
j¼1
where f¼dF/dx. The maximum likelihood (ML) estimators are the
values of s and x, which maximise Eq. (6). Grimshaw (1993) and
Chaouche and Bacro (2006) have both discussed the computation
of ML estimators of GPD parameters. They show that the problem
can be reduced to a one-dimensional search in order to speed up
computation. However, there are some samples for which no ML
solution exists. There has been some confusion about this point in
the literature. Chaouche and Bacro (2006) and Ashkar and
Nwentsa Tatsambon (2007) claim that reports of samples where
no ML solutions exist are a result of the failure of the algorithm
used to find them (a claim repeated by de Zea Bermudez and Kotz,
2010). However, it is relatively straightforward to generate a
sample for which no local maximum of the likelihood function
exists and to verify this by plotting the likelihood surface. Hosking
and Wallis (1987) showed that this occurs most frequently for
small sample sizes and negative x. For a sample size of 25 over
20% of samples with x ¼ 0.5 have no ML solution. This decreases
to around 2% for a sample size of 50, and no failures were found
for sample of size 100 and larger. These results were confirmed in
our simulations (presented in Section 4), using the algorithm of
Chaouche and Bacro (2006).
Coles and Dixon (1999) have noted that the superior perfor-
mance of MOM and PWM estimators to the ML estimator for
small sample sizes is due to the assumption of a restricted
parameter space, corresponding to finite population moments.
To incorporate similar information into a likelihood-based infer-
ence they suggest the use of a likelihood function, which pena-
lises larger estimates of x (with an infinite penalty at x ¼1),
similar to assuming a prior distribution for x. The corresponding
penalised likelihood function is given by
Lpen ðs, xÞ ¼ Lðs, xÞPðxÞ
where P(x) is the penalty function. Estimators are found as the
values of s and x, which maximise Eq. (7). In the following we will
refer to these estimators as the penalised maximum likelihood
(PML) estimators.
Martins and Stedinger (2000) propose a similar method for
estimating the parameters of the Generalised Extreme Value
distribution, which can easily be adapted to estimate the
parameters of the GPD. In their method the likelihood function
is penalised at both high and low values of x, using a beta
distribution for the penalty function. Martins and Stedinger
(2000) considered the use of a beta distribution with a mean of
 0.1 and upper and lower limits of 70.5. Obviously this will
tend to bias the estimate of x towards a value of 0.1, giving good
performance when the true value of x is  0.1, but worse
performance for other values of x. It would be interesting to
investigate the use of other beta distributions as penalty func-
tions, to find the optimal penalty to apply in different situations,
but this is beyond the scope of the current paper. In the following
we will only consider the PML estimators proposed by Coles and
Dixon (1999).
It is worth noting here that the maximum entropy (ME)
estimators proposed by Sing and Guo (1995) are equivalent to
the ML estimators in the case that the threshold is chosen before
the parameters are estimated. As mentioned before, we are not
considering the case when the threshold is estimated along with
the parameters. Therefore we will not consider the ME estimators
further.
3.3. Likelihood-moment estimation
Recently a hybrid between likelihood and moment estimators
has been proposed by Zhang (2007). Since this is a relatively new
ð6Þ
method it will be discussed in some detail here. The likelihood-
moment (LM) estimators always exist, are always feasible and are
simple to compute. They are found by solving the equation
1Xn
1
0 ¼ gðbÞ ¼ ð1bxj Þp  ð8Þ
nj¼1 1þ r
for b, where
rn
p ¼ Pn ð9Þ
j¼1 logð1bxj Þ
and the parameter r 4  1 is chosen before the estimation. Having
solved for b the GPD parameter estimates are given by
1Xn
x^ ¼ logð1bxj Þ ð10Þ
nj¼1
s^ ¼ x^ =b: ð11Þ
Zhang (2007) shows that the solution to Eq. (8) is simple to
obtain since g(b) is a smooth monotone function of b with a
unique solution in (  N,1/x(n)), unless r ¼0 or x1 ¼x2 ¼ y ¼xn. He
notes that a Newton–Raphson method will usually converge
within 4–6 iterations to a margin of relative error less than 10  6.
Zhang (2007) also shows that if r ¼ x then the asymptotic
variance of the LM estimator is equal to that of the ML estimator.
The variance of s ^ and x^ in finite samples was also presented for
several fixed values r ¼  2,  0.5 and 0.25, but no results were
presented for the case, where r is estimated from the data. Instead
the following question was proposed: Given an initial estimate for
x, it can be used as the value of r in Eq. (8) to obtain a new
estimate. If this procedure is iterated and each step uses the new
estimate of x as r, will the LM estimates converge to the ML
estimates when they exist?
ð7Þ
We have investigated the answer to this question, using the
hybrid-PWM estimate of x as the initial guess for r and iterating
until x^ converges to r or x^ o 1 (at which point the algorithm
fails, but this happens very rarely). It was found that the iterated
LM estimates did not converge to the ML estimates and that the
performance was not significantly better than the ordinary LM
estimates with the hybrid-PWM estimate of x as the initial guess
for r. An investigation was also made of the performance of the
LM estimator using the hybrid-MOM estimate of x as the initial
guess for r. The performance was very similar but with marginally
 E.B.L. Mackay et al. / Ocean Engineering 38 (2011) 1338–1346
larger mean square error in small samples. In the following the
LM estimate will refer to the non-iterated version using the
hybrid-PWM estimate of x as the initial guess for r.
3.4. Least-squares type methods
Two types of least-squares type estimators have been pro-
posed for the GPD. Moharram et al. (1993) proposed estimators,
which are obtained by minimising the sum of squared differences
between the empirical and model quantiles. Moharram et al.
(1993) used the method to estimate the threshold as well as the
scale and shape parameters and noted that their algorithm
sometimes had convergence problems. No such problems have
been encountered in our simulations, where the threshold is
chosen before the parameters are estimated.
Using a similar idea, Luceno (2006) proposed estimators found
by minimising the squared differences between empirical and
model distribution functions, given in terms of various goodness-
of-fit statistics. Luceno considered several goodness-of-fit statistics,
including the Cramer–von Mises statistic (CM), the Anderson–
Darling statistic (AD) and the right-tail weighted Anderson–
Darling statistic (ADR). In the following these estimators will be
referred to as the CM, AD and ADR estimators, respectively, and the
estimator proposed by Moharram et al. (1993) will be referred to as
the LS estimator.
3.5. The empirical percentile method
Castillo and Hadi (1997) proposed an estimator found by
equating percentiles of the empirical and theoretical distribution
functions, known as the empirical percentile method (EPM). The
EPM estimators always exist and are always feasible, but they can
be very computationally intensive for larger samples since it is
necessary to solve n  1 equations by numerical methods in order
to compute the estimates.
3.6. Bayesian methods
De Zea Bermudez and Kotz (2010) reviewed several Bayesian
methods for estimating the parameters of the GPD. They note that
although they can produce good results, they are difficult to
implement and are often computationally intensive. Recently
Zhang and Stephens (2009) have proposed a new method, based
on maximum likelihood, but which uses a data-driven prior. This
prior is chosen in such a way that the estimates always exist and
can be expressed as explicit functions of the observations. This
enables the estimates to be computed very efficiently, since the
Markov chain Monte Carlo techniques (typically used in Bayesian
inference) are not required to search for solutions. Following
Zhang and Stephens (2009) we will simply refer to this as the
NEW estimator.
3.7. Robust methods
Several robust methods estimators have been proposed for the
parameters of the GPD, which are less sensitive to outliers (e.g.
Dupuis, 1998; Peng and Welsh, 2001; Juarez and Schucany, 2004).
Davison and Smith (1990) caution against the use of robust
methods in extremes, arguing that the highest observations are
those which are most informative and that careful checking of the
data by the analyst is preferable. Moreover, Juarez and Schucany
(2004) have shown that these robust estimators do not perform
as well as ML estimator when there is no contamination of the
data. Therefore robust methods are not considered further here.
1341
4. Monte Carlo simulations
The performance of the estimators described in Section 3 was
compared using the Monte Carlo simulation. Since the results are
invariant to the value of s, we have arbitrarily chosen s ¼1. Trials
have been made with n¼ 25, 50, 100, 200 and 500 and x ¼  0.5,
 0.45, y, 0.45, 0.5. The GPD is a valid probability distribution for
any value of x; however, we have restricted our interest to the
range 0.5 r x r0.5 since these are the values, which are
commonly observed for environmental variables. In particular
the values of x observed for significant wave height are normally
in the range  0.25r x r0.25. For each value of n and x, 10,000
samples were generated and the estimates of s and x were
calculated using each method (although for n¼500 the EPM
estimators were not computed as they are far more computa-
tionally intensive than the other estimators and would have taken
several days to compute).
Results will be presented here in terms of the quantile
estimates rather than the parameter estimates, since most often
we are interested in the accuracy of the predicted extreme values
rather than the estimated parameters of the distribution. Quantile
estimators are obtained by rearranging Eq. (1) to obtain an
expression for x(F) and substituting the parameter estimators in
place of the parameters. Presenting results in terms of the
accuracy of the quantile estimators rather than parameter esti-
mators simplifies the comparison between methods since only
one quantity is being compared rather than two (the scale and
shape parameters).
We shall consider the bias and root-mean-square error (RMSE) of
quantiles at a non-exceedance probability of 0.999. Under the
assumption that there are approximately 10 storms per year, which
exceed the threshold, this corresponds to the 100-year return value.
From an extensive analysis of buoy data from the North Pacific,
Mackay et al. (2010) found that the average number of storms per
year, which exceeded the threshold value, was between 4 and 20.
The variation in this range was partly due to natural sampling
effects and partly due to the choice of threshold used for each data
set. The performance of the various estimators is not entirely
independent of quantile under consideration, but from our investi-
gations those that had the best performance predicting quantiles at
a non-exceedance probability of 0.999 also performed well at higher
and lower non-exceedance probabilities.
Because of the large number of estimators and cases consid-
ered in this study, results are only presented for a subset of cases.
Tables 1–5 list the relative bias and RMSE in quantile estimates
for x ¼  0.5,  0.25, 0, 0.25 and 0.5. For a subset of the estimators
results are presented graphically in Figs. 1–5 for all cases
considered. The results have been presented in terms of bias
and RMSE rather than bias and variance since the RMSE gives a
better indication of absolute accuracy. However, these statistics
are related by RMSE2 ¼bias2 þvariance.
The results for x 40 can be summarised as follows:
 The MOM, GPWM and PML estimators consistently have
amongst the lowest RMSE of all the estimators, but this is at
the expense of a strong negative bias, caused by the assump-
tion of a restricted range for the shape parameter.
 Of the estimators with low bias for x 40, the LM estimator has
the lowest RMSE for small sample sizes.
 For large sample sizes (n4200) the NEW estimator has a low
bias and RMSE close to that of the ML estimator, but the NEW
estimator has the advantage that it is very fast to compute.
 The PWM estimator has low bias, but higher RMSE than other
estimators.
 The ML, LS, CM, AD, ADR, EPM and NEW estimators all have
strong positive bias and high RMSE for small sample sizes.
1342 E.B.L. Mackay et al. / Ocean Engineering 38 (2011) 1338–1346

Table 1
Bias and RMSE of quantile estimators at a non-exceedance probability of 0.999 for n¼ 25.

x¼ Bias [%] RMSE [%]

 0.5  0.25 0 0.25 0.5  0.5  0.25 0 0.25 0.5

MOM 4.6 1.6  6.0  24.1  45.1 25.0 31.8 44.2 56.9 74.1
PWM 10.0 9.4 9.1 6.3  4.9 36.4 47.2 67.3 101.4 117.1
GPWM  3.5  3.9  6.6  20.2  41.1 23.8 38.8 52.5 62.2 64.5
ML  5.7  7.1 4.0 53.3 147.0 41.3 39.2 123.4 863.5 1231.1
PML  7.0  9.5  14.6  26.7  46.0 18.0 30.4 47.2 59.6 63.2
LM  4.2  7.2  10.0  10.2  16.4 18.0 28.5 51.2 96.1 126.7
LS 0.8 4.1 32.5 15114.1 1029372.6 21.7 42.2 162.3 465930.7 28499135.9
CM 87.4 123.4 406.9 644.1 1216.5 1222.6 846.0 4552.2 4093.3 13621.1
AD 40.5 220.4 283.5 1310.4 2737.4 269.6 4225.3 2407.8 22091.6 55414.0
ADR 11.0 29.0 75.6 209.9 441.8 56.2 175.1 488.8 1597.9 2882.8
EPM 12.5 34.8 118.6 617.1 41810.0 34.7 85.7 308.3 3896.1 1219638.8
NEW 14.5 26.9 54.8 121.2 255.1 43.4 85.0 188.0 1053.2 4685.4

Table 2
Bias and RMSE of quantile estimators at a non-exceedance probability of 0.999 for n¼ 50.

x¼ Bias [%] RMSE [%]

 0.5  0.25 0 0.25 0.5  0.5  0.25 0 0.25 0.5

MOM 3.2 1.0  3.4  17.9  39.5 16.9 22.5 33.8 47.0 62.2
PWM 5.9 5.4 4.6 4.2  1.6 22.6 30.7 45.1 72.8 96.7
GPWM  1.6  2.9  3.7  14.1  33.3 12.6 24.0 38.0 50.4 55.3
ML  5.7  6.2  1.1 15.3 46.1 11.4 21.9 48.7 117.0 295.5
PML  5.5  6.5  7.6  14.4  32.0 11.4 21.0 36.4 51.0 53.7
LM  2.0  3.7  5.5  5.6  10.7 11.7 20.0 36.9 68.7 95.6
LS  0.6 0.5 13.2 299.7 18781.7 12.6 22.8 69.3 3885.2 531883.8
CM 15.0 32.6 87.7 146.4 212.5 56.4 173.3 788.0 1080.1 954.9
AD 10.8 22.0 57.5 99.7 138.2 39.5 114.9 325.6 503.5 543.1
ADR 5.4 10.1 22.8 59.4 106.8 26.0 46.6 86.8 233.6 418.1
EPM 5.5 14.1 52.5 244.3 1022.5 15.3 39.5 124.5 2044.9 12752.1
NEW 4.8 9.2 18.7 36.7 60.0 14.8 29.5 62.6 132.3 254.6

Table 3
Bias and RMSE of quantile estimators at a non-exceedance probability of 0.999 for n¼ 100.

x¼ Bias [%] RMSE [%]

 0.5  0.25 0 0.25 0.5  0.5  0.25 0 0.25 0.5

MOM 2.2 0.7  1.9  12.4  34.1 11.4 15.9 25.1 38.1 51.9
PWM 3.7 3.1 2.3 2.8  0.8 14.4 20.7 31.0 52.0 73.1
GPWM  0.2  1.8  1.8  10.2  27.0 7.8 14.9 27.0 39.5 47.3
ML  3.4  3.6  1.7 4.8 18.1 7.2 13.8 29.9 56.4 97.6
PML  3.4  3.8  4.0  7.1  18.9 7.2 14.0 26.6 41.2 45.7
LM  0.9  1.9  2.9  3.4  6.5 7.7 13.8 26.3 51.0 75.3
LS  0.2  0.6 6.0 89.3 1901.1 8.4 14.7 37.7 1297.4 38039.0
CM 7.6 12.0 22.5 45.3 70.7 27.7 48.4 96.0 182.6 272.6
AD 4.5 8.1 18.6 31.8 57.7 16.1 31.0 82.9 132.1 204.7
ADR 2.2 5.1 10.2 22.4 38.7 11.5 23.1 44.9 85.1 135.4
EPM 2.4 7.5 27.6 104.6 463.9 8.1 20.0 65.7 373.4 6133.1
NEW 1.9 4.1 8.7 16.8 27.2 7.7 16.2 34.1 65.2 106.2

The results for x o0 can be summarised as follows:
 The LM estimator consistently has amongst the lowest RMSE
and a small negative bias.
 The MOM, PWM and GPWM estimators have low bias but
larger RMSE than other methods in small samples.
 The ML and PML estimators have a small negative bias
and low variance, but sometimes solutions do not exist in
small samples (the values of bias and RMSE shown
for n ¼25 and 50 are for those samples where the solutions
exist).
 The LS estimator has low bias but not the lowest RMSE.
 The CM, AD, ADR and EPM estimators all have strong positive
bias and high RMSE for small sample sizes, decreasing at large
sample sizes (although the EPM estimator is extremely slow to
compute for large sample sizes).
 E.B.L. Mackay et al. / Ocean Engineering 38 (2011) 1338–1346 1343

Table 4
Bias and RMSE of quantile estimators at a non-exceedance probability of 0.999 for n¼ 200.

x¼ Bias [%] RMSE [%]

 0.5  0.25 0 0.25 0.5  0.5  0.25 0 0.25 0.5

MOM 1.3 0.4  1.0  9.5  29.7 7.6 10.9 18.6 30.2 41.0
PWM 2.8 1.6 0.9 1.3 2.2 10.0 14.0 22.2 35.8 65.2
GPWM 0.4  0.9  1.0  7.3  22.1 5.4 9.7 19.0 30.4 39.8
ML  2.1  2.0  0.9 2.6 9.3 4.6 9.3 20.3 35.9 58.5
PML  2.0  2.2  2.0  3.2  10.2 4.6 9.4 19.0 31.7 37.3
LM  0.3  1.2  1.5  1.9  1.4 5.3 9.5 19.0 35.6 65.8
LS 0.0  0.2 3.1 31.5 141.1 5.6 9.8 24.5 208.6 1056.8
CM 4.4 6.3 10.8 19.1 29.0 14.5 26.9 50.9 84.1 126.9
AD 2.3 4.2 8.7 14.9 24.9 9.2 17.9 38.3 59.0 84.3
ADR 1.6 2.7 4.6 10.9 16.4 7.2 14.0 27.5 48.5 68.1
EPM 1.4 4.9 18.3 58.3 164.4 5.0 13.2 44.4 150.5 732.6
NEW 0.8 1.6 4.5 8.6 13.9 4.5 10.1 21.3 39.7 59.6

Table 5
Bias and RMSE of quantile estimators at a non-exceedance probability of 0.999 for n¼ 500.

x¼ Bias [%] RMSE [%]

 0.5  0.25 0 0.25 0.5  0.5  0.25 0 0.25 0.5

MOM 0.9 0.2  0.3  5.3  25.0 4.7 7.1 12.0 22.6 37.2
PWM 1.4 0.9 0.5 0.6 0.3 5.8 8.9 13.6 21.9 39.7
GPWM 0.6  0.1  0.5  4.9  16.2 3.4 5.9 11.9 21.2 32.3
ML  1.0  0.9  0.4 0.7 2.3 2.6 5.7 12.3 21.0 31.6
PML  1.0  1.1  0.9  1.2  3.9 2.6 5.6 12.0 20.6 27.1
LM  0.1  0.4  0.9  0.9  1.5 3.0 5.8 11.8 22.9 40.6
LS 0.0  0.1 1.7 11.8 53.7 3.4 6.0 14.9 55.6 363.3
CM 2.2 2.6 4.1 6.9 10.6 7.7 14.6 26.6 40.2 55.4
AD 1.3 1.7 2.8 5.5 7.3 5.0 9.7 19.0 31.0 43.0
ADR 0.8 1.1 2.3 3.4 6.9 4.1 8.2 15.7 26.2 38.7
NEW 0.2 0.8 1.7 3.1 4.9 2.5 5.8 12.6 22.3 32.5

Fig. 1. Bias and RMSE of quantile estimators at a non-exceedance probability of 0.999 for n¼ 25.

 The NEW estimator has a positive bias and high RMSE for
small sample sizes but has low bias and RMSE at high sample
sizes and is very fast to compute.
It is clear that there is no one estimator, which stands out as
being the best in all situations. For positive x the lowest RMSE is
achieved at expense of negative bias. This is problematic when
estimating extremes as it is usually preferable to use conservative
estimates of return values. For small sample sizes of 200 or less it
could be argued that the LM estimator has the best all round
performance, since it has amongst the lowest bias and RMSE for
all values of x in the range considered here. The LM estimator
always exists, is always feasible and is reasonably fast to
compute. For large samples, although the ML is optimal it is not
the fastest to compute and the NEW estimator has very similar
bias and RMSE, with the advantage that it is very fast to compute.
It is interesting to note that Zhang and Stephens (2009) showed
that the NEW estimator has amongst the highest efficiencies for
parameter estimates in small sample sizes. However, the small
positive bias in the estimate of the shape parameter causes
positive bias and high RMSE in quantile estimators at low
exceedance probabilities.
5. Discussion and example
The results presented in the previous section have compared
the accuracy of estimators under the assumption that threshold
1344 E.B.L. Mackay et al. / Ocean Engineering 38 (2011) 1338–1346

Fig. 2. Bias and RMSE of quantile estimators at a non-exceedance probability of 0.999 for n ¼50.

Fig. 3. Bias and RMSE of quantile estimators at a non-exceedance probability of 0.999 for n¼ 100.

Fig. 4. Bias and RMSE of quantile estimators at a non-exceedance probability of 0.999 for n¼ 200.

Fig. 5. Bias and RMSE of quantile estimators at a non-exceedance probability of 0.999 for n¼ 500.

exceedances follow a generalised Pareto distribution. In practical importance if it is to be used to extrapolate outside the range of
situations a threshold must be selected for which the GPD is a observations. As mentioned earlier on, the method preferred by
valid approximating distribution for the data. Selecting a thresh- most practitioners is to calculate parameter estimates for a range
old and demonstrating that the GPD is a valid model is of critical of thresholds and examine the variation of certain statistics with
 E.B.L. Mackay et al. / Ocean Engineering 38 (2011) 1338–1346
Fig. 6. Variation of parameter and return value estimates with threshold.
the threshold. If the GPD is a valid model for a threshold u0 then
for u 4u0 the estimates of the shape parameter, normalised scale
parameter (sn ¼ s  xu) and return values should tend to constant
values (Coles, 2001).
The differences between several estimators are illustrated with
an example using buoy measurements of significant wave height.
The data comes from NDBC buoy 46002, located in the North East
Pacific, 500 km off the coast of Oregon. The data covers the period
1978–2008 and consists of 20 min samples at hourly intervals.
Following the recommendation of Forristall et al. (1996), a 3 h
moving average filter has been applied to the data to reduce the
effect of sampling variability. Storm peaks are identified as local
maxima with a minimum separation of 36 hours.
Fig. 6 shows the variation of the estimates of the shape
parameter, normalised scale parameter and 100-year return values
using the MOM, PWM and LM estimators with threshold value, as
well as the number of exceedances at each threshold value. It is
clear that the PWM estimator is very sensitive to the threshold
value, making it difficult to identify a clear region of stability in the
parameters. The MOM estimator is slightly more sensitive than the
LM estimator, displaying a slightly higher variation with threshold
value. These three estimators have been chosen to illustrate the
differences in sensitivity to threshold and it should be noted that,
although not shown, the GPWM and PML estimators gave very
similar results to the LM estimator.
The data set used in this example is quite long and often return
values must be estimated using shorter data sets. Despite the use
of a large data set there is considerable variation in these
estimates with the threshold and there is no clear choice of
threshold above which the estimates tend towards constant
values. The addition of confidence bounds can aid threshold
selection. Mackay et al. (2010) used a modified bootstrap techni-
que to estimate confidence bounds for the parameters, which also
smoothes the variation with threshold (see their Figs. 2 and 3 and
1345
accompanying text). Obviously, using an estimator with a low
sensitivity to threshold choice and low RMSE will aid the
identification of a valid threshold.
Confidence bounds estimated using a bootstrap technique give
an estimate of the variance of the return values and do not take
into account the bias, since this is not known in real situations.
The RMSE calculated in the previous section gives a better
indication of the absolute accuracy of the return values from
various methods, but it does not account for uncertainty due to
violation of the model assumptions, such as that of stationary
distribution.
6. Conclusions
The most commonly used estimators for the GPD in oceano-
graphic studies are the MOM, PWM and ML estimators, all of
which have disadvantages. The ML estimator is asymptotically
efficient, but for small samples the ML estimator does not always
exist and when it does exist it has a larger bias and variance than
other estimators. The MOM and PWM estimators always exist and
are simple to compute, but are sensitive to the threshold value.
The LM estimator introduced by Zhang (2007) always exists, is
simple to compute and has a low sensitivity to threshold choice.
In this study we have extended the results of Zhang (2007) to
show that the LM estimator using the hybrid-PWM estimate as
the first guess performs well for all sample sizes and values of
shape parameter. The bias and RMSE of the LM estimator are
consistently the lowest or close to the lowest of all the estimators
tested. For large sample sizes the NEW estimator proposed by
Zhang and Stephens (2009) has a bias and variance very close to
those of the ML estimator, but the NEW estimator has the
advantage that it is very fast to compute. It is recommended that
for small sample sizes the LM estimator, using the hybrid-PWM
1346 E.B.L. Mackay et al. / Ocean Engineering 38 (2011) 1338–1346
estimator as a first guess, should be used in preference to the
other estimators considered in this study. In the fortunate situa-
tion that a large sample of size 500 or upwards is available, the
NEW estimator will give accurate results for very reasonable
computational cost.
References
Ashkar, F., Nwentsa Tatsambon, C., 2007. Revisiting some estimation methods for
the generalized Pareto distribution. J. Hydrol. 346, 136–143.
Beirlant, J., Goegebeur, Y., Segers, J., Teugels, J., 2004. Statistics of Extremes. John
Wiley and Sons 490 pp.
Caires, S., Sterl, A., 2005. 100-Year return value estimates for ocean wind speed
and significant wave height from the ERA-40 data. J. Clim. 18 (7), 1032–1048.
Castillo, E., Hadi, A.S., 1997. Fitting the generalized Pareto distribution to data. J.
Am. Stat. Assoc. 92 (440), 1609–1620.
Chaouche, A., Bacro, J.N., 2006. Statistical inference for the generalized Pareto
distribution: maximum likelihood revisited. Commun. Stat.: Theory Methods
35 (5), 785–802.
Coles, S., 2001. An Introduction to the Statistical Modelling of Extreme Values.
Springer-Verlag, London.
Coles, S., Dixon, M.J., 1999. Likelihood-based inference for extreme value models.
Extremes 2 (1), 5–23.
Davison, A.C., Smith, R.L., 1990. Models for exceedances over high thresholds. J. R.
Stat. Soc. B 52 (3), 393–442.
de Zea Bermudez, P., Kotz, S., 2010. Parameter estimation of the generalized Pareto
distribution—Parts I & II. J. Stat. Plann. Inference 140, 1353–1388.
Deidda, R., Puliga, M., 2009. Performances of some parameter estimators of the
generalized Pareto distribution over rounded-off samples. Phys. Chem. Earth
34, 626–634.
Dupuis, D.J., 1996. Estimating the probability of obtaining nonfeasible parameter
estimates of the generalized Pareto distribution. J. Stat. Comput. Simulation
54, 197–209.
Dupuis, D.J., 1998. Exceedances over high thresholds: a guide to threshold
selection. Extremes 1 (3), 251–261.
Dupuis, D.J., Tsao, M., 1998. A hybrid estimator for generalized Pareto and
extreme-value distributions. Commun. Stat.: Theory Methods 27, 925–941.
Ferreira, J.A., Guedes Soares, C., 1998. An application of the peaks over threshold
method to predict extremes of significant wave height. J. Offshore Mech. Arctic
Eng. 120, 165–176.
Forristall, G.Z., Heideman, J.C., Leggett, I.M., Roskam, B., Vanderschuren, L., 1996.
Effect of sampling variability on hindcast and measured wave heights. J.
Waterway, Port, Coastal Ocean Eng. 122 (5), 216–225.
Grimshaw, S.D., 1993. Computing maximum likelihood estimates for the general-
ized Pareto distribution. Technometrics 35, 185–191.
Hosking, J.R.M., 1990. L-moments: analysis and estimation of distributions using
linear combinations of order statistics. J. R. Stat. Soc. B 52 (1), 105–124.
Hosking, J.R.M., Wallis, J.R., 1987. Parameter and quantile estimation for the
generalized Pareto distribution. Technometrics 29, 339–349.
Juarez, S.F., Schucany, W.R., 2004. Robust and efficient estimation for the general-
ized Pareto distribution. Extremes 7 (3), 237–251.
Luceno, A., 2006. Fitting the generalized Pareto distribution to data using
maximum goodness-of-fit estimators. Comput. Stat. Data Anal. 51, 904–917.
Mackay, E.B.L., Challenor, P.G., Bahaj, A., 2010. On the use of discrete seasonal and
directional models for the estimation of extreme wave conditions. Ocean Eng.
37, 425–442.
Martins, E.S., Stedinger, J.R., 2000. Generalized maximum-likelihood generalized
extreme-value quantile estimators for hydrological data. Water Resour. Res.
36 (3), 737–744.
Mathiesen, M., Goda, Y., Hawkes, P., Mansard, E., Martin, M.J., Peltier, E.,
Thompson, E., van Vledder, G., 1994. Recommended practice for extreme
wave analysis. J. Hydraul. Res. 32 (6), 803–814.
Moharram, S.H., Gosain, A.K., Kapoor, P.N., 1993. A comparative study for the
estimators of the generalized Pareto distribution. J. Hydrol. 150, 169–185.
Naess, A., 1998. Statistical extrapolation of extreme value data based on the Peaks
Over Threshold method. J. Offshore Mech. Arctic Eng. 120, 91–96.
Peng, L., Welsh, A.H., 2001. Robust estimation of the generalized Pareto distribu-
tion. Extremes 4 (1), 53–65.
Rasmussen, P.F., 2001. Generalized probability weighted moments: application to
the generalized Pareto distribution. Water Resour. Res. 37 (6), 1745–1751.
Singh, V.P., Guo, H., 1995. Parameter estimation for 3-parameter generalized
Pareto distribution by the principle of maximum entropy (POME). Hydrol. Sci.
J. 40, 165–181.
Zhang, J., 2007. Likelihood moment estimation for the generalised Pareto distribu-
tion. Aust. N. Z. J. Stat. 49 (1), 69–77.
Zhang, J., Stephens, M.A., 2009. A new and efficient estimation method for the
generalized Pareto distribution. Technometrics 51 (3), 316–325.