Extracting conditionally heteroskedastic components using independent component analysis
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Publication:5111846
asymptotic normalityautocorrelationblind source separationARMA-GARCH processprincipal volatility component
Factor analysis and principal components; correspondence analysis (62H25) Time series, auto-correlation, regression, etc. in statistics (GARCH) (62M10) Applications of statistics to actuarial sciences and financial mathematics (62P05) Economic time series analysis (91B84) Stationary stochastic processes (60G10)
Abstract: In the independent component model, the multivariate data is assumed to be a mixture of mutually independent latent components, and in independent component analysis (ICA) the aim is to estimate these latent components. In this paper we study an ICA method which combines the use of linear and quadratic autocorrelations in order to enable efficient estimation of various kinds of stationary time series. Statistical properties of the estimator are studied by finding its limiting distribution under general conditions, and the asymptotic variances are derived in the case of ARMA-GARCH model. We use the asymptotic results and a finite sample simulation study to compare different choices of a weight coefficient. As it is often of interest to identify all those components which exhibit stochastic volatility features we also suggest a test statistic for this problem. We also show that a slightly modified version of principal volatility components (PVC) can be seen as an ICA method. Finally, we apply the estimators in analyzing a data set which consists of time series of exchange rates of seven currencies to US dollar. Supplementary material including proofs of the theorems is available online.
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Cited in
(11)- Investigation on the skewness for independent component analysis
- TVICA -- time varying independent component analysis and its application to financial data
- Large-sample properties of non-stationary source separation for Gaussian signals
- Stationary subspace analysis based on second-order statistics
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- New independent component analysis tools for time series
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- Blind source separation for compositional time series
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