Quantile and Log-Quantile Least Squares for Robust-Efficient Fitting and Validation of Log-Location-Scale Loss Models
\begin{quote} {\bf\em Abstract\/}. ~A variety of models for insurance and other types of losses are special cases of the {\em log-location-scale\/} family, with the lognormal and Pareto-$I$ distributions being the most prominent examples. The latter also serves as a primary example of infinite-mean models that often present challenges in risk management. In this paper, we utilize two {\em asymptotic\/} theorems -- the joint normality of sample quantiles (of {\em i.i.d.\/} random variables) and the delta method -- to construct nonlinear and linear regression frameworks for estimation and validation of log-location-scale distributions. Within these regression frameworks, four equally robust estimators -- ordinary and generalized quantile (oQLS and gQLS) and log-quantile (log-oQLS and log-gQLS) least squares -- are proposed. For log-location-scale loss models, the logarithmic transformation of quantiles approximates the nonlinear least squares solution {\em exactly\/} and yields more accurate estimators. Also, the log-linear regression framework facilitates a convenient way to study the estimators' properties and to design a residuals-based goodness-of-fit test. Moreover, log-oQLS and log-gQLS have explicit formulas and can be easily computed for medium- ($n=10^3$), large- ($n=10^4$), and very large-size ($n > 10^6$) samples. Computational and statistical performances of the estimators, outlier-labeling rules, and the goodness-of-fit test are illustrated using simulated and real datasets. \vspace{2mm} {\bf\em Keywords\/}. ~Goodness-of-Fit; Outliers; Quantiles; Relative Efficiency; Robustness. \end{quote}