Common functional principal components

DOI10.1214/07-AOS516zbMATH Open1169.62057arXiv0901.4252OpenAlexW3100943941MaRDI QIDQ1002147FDOQ1002147

Alois Kneip, Wolfgang K. Härdle, Michal Benko

Publication date: 25 February 2009

Published in: The Annals of Statistics (Search for Journal in Brave)

Abstract: Functional principal component analysis (FPCA) based on the Karhunen--Lo`{e}ve decomposition has been successfully applied in many applications, mainly for one sample problems. In this paper we consider common functional principal components for two sample problems. Our research is motivated not only by the theoretical challenge of this data situation, but also by the actual question of dynamics of implied volatility (IV) functions. For different maturities the log-returns of IVs are samples of (smooth) random functions and the methods proposed here study the similarities of their stochastic behavior. First we present a new method for estimation of functional principal components from discrete noisy data. Next we present the two sample inference for FPCA and develop the two sample theory. We propose bootstrap tests for testing the equality of eigenvalues, eigenfunctions, and mean functions of two functional samples, illustrate the test-properties by simulation study and apply the method to the IV analysis.

Full work available at URL: https://arxiv.org/abs/0901.4252

zbMATH Keywords

bootstraptwo sample problem

Mathematics Subject Classification ID

Nonparametric regression and quantile regression (62G08) Factor analysis and principal components; correspondence analysis (62H25) Nonparametric statistical resampling methods (62G09) Applications of statistics to actuarial sciences and financial mathematics (62P05)

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Uses Software

• fda (R)

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