Search results for: autoregressive model

Authors: Diteboho Xaba, Kolentino Mpeta, Tlotliso Qejoe

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This paper assesses the in-sample forecasting of the South African exchange rates comparing a linear ARIMA model and a SETAR model. The study uses a monthly adjusted data of South African exchange rates with 420 observations. Akaike information criterion (AIC) and the Schwarz information criteria (SIC) are used for model selection. Mean absolute error (MAE), root mean squared error (RMSE) and mean absolute percentage error (MAPE) are error metrics used to evaluate forecast capability of the models. The Diebold –Mariano (DM) test is employed in the study to check forecast accuracy in order to distinguish the forecasting performance between the two models (ARIMA and SETAR). The results indicate that both models perform well when modelling and forecasting the exchange rates, but SETAR seemed to outperform ARIMA.

Keywords: ARIMA, error metrices, model selection, SETAR

Procedia PDF Downloads 244

Authors: Salman Mohamadi, Seyed Mohammad Ali Tayaranian Hosseini, Hamidreza Amindavar

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In this paper, we provide a procedure to analyze and model EEG (electroencephalogram) signal as a time series using ARIMA-GARCH to predict an epileptic attack. The heteroskedasticity of EEG signal is examined through the ARCH or GARCH, (Autore- gressive conditional heteroskedasticity, Generalized autoregressive conditional heteroskedasticity) test. The best ARIMA-GARCH model in AIC sense is utilized to measure the volatility of the EEG from epileptic canine subjects, to forecast the future values of EEG. ARIMA-only model can perform prediction, but the ARCH or GARCH model acting on the residuals of ARIMA attains a con- siderable improved forecast horizon. First, we estimate the best ARIMA model, then different orders of ARCH and GARCH modelings are surveyed to determine the best heteroskedastic model of the residuals of the mentioned ARIMA. Using the simulated conditional variance of selected ARCH or GARCH model, we suggest the procedure to predict the oncoming seizures. The results indicate that GARCH modeling determines the dynamic changes of variance well before the onset of seizure. It can be inferred that the prediction capability comes from the ability of the combined ARIMA-GARCH modeling to cover the heteroskedastic nature of EEG signal changes.

Keywords: epileptic seizure prediction , ARIMA, ARCH and GARCH modeling, heteroskedasticity, EEG

Procedia PDF Downloads 406

Authors: Petra Palic, Maruska Vizek

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We provide an in-depth analysis of interdependence of asset returns and volatilities in developed and developing countries. The analysis is split into three parts. In the first part, we use multivariate GARCH model in order to provide stylized facts on cross-market volatility spillovers. In the second part, we use a generalized vector autoregressive methodology developed by Diebold and Yilmaz (2009) in order to estimate separate measures of return spillovers and volatility spillovers among sovereign bond, equity, foreign exchange and commodity markets. In particular, our analysis is focused on cross-market return, and volatility spillovers in 19 developed and developing countries. In order to estimate named spillovers, we use daily data from 2008 to 2017. In the third part of the analysis, we use a generalized vector autoregressive framework in order to estimate total and directional volatility spillovers. We use the same daily data span for one developed and one developing country in order to characterize daily volatility spillovers across stock, bond, foreign exchange and commodities markets.

Keywords: cross-market spillovers, sovereign bond markets, equity markets, value at risk (VAR)

Procedia PDF Downloads 264

Authors: Wararit Panichkitkosolkul

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The unit root tests based on the robust estimator for the first-order autoregressive process are proposed and compared with the unit root tests based on the ordinary least squares (OLS) estimator. The percentiles of the null distributions of the unit root test are also reported. The empirical probabilities of Type I error and powers of the unit root tests are estimated via Monte Carlo simulation. Simulation results show that all unit root tests can control the probability of Type I error for all situations. The empirical power of the unit root tests based on the robust estimator are higher than the unit root tests based on the OLS estimator.

Keywords: autoregressive, ordinary least squares, type i error, power of the test, Monte Carlo simulation

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Authors: Souhir Ben Amor, Heni Boubaker, Lotfi Belkacem

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This aims of this paper is to forecast the electricity spot prices. First, we focus on modeling the conditional mean of the series so we adopt a generalized fractional -factor Gegenbauer process (k-factor GARMA). Secondly, the residual from the -factor GARMA model has used as a proxy for the conditional variance; these residuals were predicted using two different approaches. In the first approach, a local linear wavelet neural network model (LLWNN) has developed to predict the conditional variance using the Back Propagation learning algorithms. In the second approach, the Gegenbauer generalized autoregressive conditional heteroscedasticity process (G-GARCH) has adopted, and the parameters of the k-factor GARMA-G-GARCH model has estimated using the wavelet methodology based on the discrete wavelet packet transform (DWPT) approach. The empirical results have shown that the k-factor GARMA-G-GARCH model outperform the hybrid k-factor GARMA-LLWNN model, and find it is more appropriate for forecasts.

Keywords: electricity price, k-factor GARMA, LLWNN, G-GARCH, forecasting

Procedia PDF Downloads 232

Authors: Gisele Mah, Paul Saah

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The rising rates of inflation are hindering economic growth in developing nations. Hence, this study investigated the effects of inflation rates on the economic growth of South Africa using the secondary time series data from 1987 to 2022. The main objectives of this study were to investigate the long run relationship between inflation and economic growth, and also to determine the causality direction between these two variables. The study utilized the Autoregressive Distributed Lag (ARDL) bounds test of co-integration to investigate whether there is a long-run relationship between inflation and economic growth. The Pairwise Granger causality approach was employed to determine the second objective, which is the direction of causality. The study discovered only one co-integration relationship between our variables and it was between inflation and economic growth. The results showed that there is a negative and significant relationship between inflation and economic growth. There appeared to be a positive and significant relationship between economic growth and exchange rate. The interest rates have shown to be negative and insignificant in explaining economic growth. The study also established that inflation does Granger cause economic growth which is given as GDP. Similarly, the study discovered that inflation Granger causes exchange rates. Therefore, the study recommends that inflation should be decreased in South Africa, in order for economic growth to increase. Contrary, this study recommends that South Africa should increase its exchange rates, in order for economic growth to also increase.

Keywords: inflation rate, economic growth, South Africa, autoregressive distributed lag model

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Authors: Wong Hock Tsen

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This study aims to investigate the impact of exchange rate volatility on real export in Malaysia. The moving standard deviation with order three (MSD(3)) is used for the measurement of exchange rate volatility. The conventional and partially asymmetric autoregressive distributed lag (ARDL) models are used in the estimations. This study finds exchange rate volatility to have significant impact on real total export and some sub-categories of real total export. Moreover, this study finds that the positive or negative exchange rate volatility tends to have positive or negative impact on real export. Exchange rate volatility can be harmful to export of Malaysia.

Keywords: exchange rate volatility, autoregressive distributed lag, export, Malaysia

Procedia PDF Downloads 326

Authors: Vilma Deltuvaitė

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Comparisons of financial development across countries are central to answering many of the questions on factors leading to economic development. For this reason this study analyzes the implications of financial system’s development on country’s economic development. The aim of the article: to analyze the impact of financial system’s development on economic development. The following research methods were used: systemic, logical and comparative analysis of scientific literature, analysis of statistical data, time series model (Autoregressive Distributed Lag (ARDL) Model). The empirical results suggest about positive short and long term effect of stock market development on GDP per capita.

Keywords: banking sector, economic development, financial system’s development, stock market, private bond market

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Authors: Nor Zila Abd Hamid, Mohd Salmi M. Noorani

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This study is focused on the development of prediction models of the Ozone concentration time series. Prediction model is built based on chaotic approach. Firstly, the chaotic nature of the time series is detected by means of phase space plot and the Cao method. Then, the prediction model is built and the local linear approximation method is used for the forecasting purposes. Traditional prediction of autoregressive linear model is also built. Moreover, an improvement in local linear approximation method is also performed. Prediction models are applied to the hourly ozone time series observed at the benchmark station in Malaysia. Comparison of all models through the calculation of mean absolute error, root mean squared error and correlation coefficient shows that the one with improved prediction method is the best. Thus, chaotic approach is a good approach to be used to develop a prediction model for the Ozone concentration time series.

Keywords: chaotic approach, phase space, Cao method, local linear approximation method

Procedia PDF Downloads 332

Authors: M. Karimpour, N. Elkhoury, L. Hitihamillage, S. Moridpour, R. Hesami

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There is a necessity among rail transportation authorities for a superior understanding of the rail track degradation overtime and the factors influencing rail degradation. They need an accurate technique to identify the time when rail tracks fail or need maintenance. In turn, this will help to increase the level of safety and comfort of the passengers and the vehicles as well as improve the cost effectiveness of maintenance activities. An accurate model can play a key role in prediction of the long-term behaviour of railroad tracks. An accurate model can decrease the cost of maintenance. In this research, the rail track degradation is predicted using an autoregressive moving average with exogenous input (ARMAX). An ARMAX has been implemented on Melbourne tram data to estimate the values for the tram track degradation. Gauge values and rail usage in Million Gross Tone (MGT) are the main parameters used in the model. The developed model can accurately predict the future status of the tram tracks.

Keywords: ARMAX, dynamic systems, MGT, prediction, rail degradation

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Authors: Yuzhi Cai

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This talk presents a Bayesian approach to quantile autoregressive (QAR) time series model estimation and forecasting. We establish that the joint posterior distribution of the model parameters and future values is well defined. The associated MCMC algorithm for parameter estimation and forecasting converges to the posterior distribution quickly. We also present a combining forecasts technique to produce more accurate out-of-sample forecasts by using a weighted sequence of fitted QAR models. A moving window method to check the quality of the estimated conditional quantiles is developed. We verify our methodology using simulation studies and then apply it to currency exchange rate data. An application of the method to the USD to GBP daily currency exchange rates will also be discussed. The results obtained show that an unequally weighted combining method performs better than other forecasting methodology.

Keywords: combining forecasts, MCMC, quantile modelling, quantile forecasting, predictive density functions

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Authors: Longqing Li

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The paper addresses the inefficiency of the classical model in measuring the Value-at-Risk (VaR) using a normal distribution or a Student’s t distribution. Specifically, the paper focuses on the one day ahead Value-at-Risk (VaR) of major stock market’s daily returns in US, UK, China and Hong Kong in the most recent ten years under 95% confidence level. To improve the predictable power and search for the best performing model, the paper proposes using two leading alternatives, Extreme Value Theory (EVT) and a family of GARCH models, and compares the relative performance. The main contribution could be summarized in two aspects. First, the paper extends the GARCH family model by incorporating EGARCH and TGARCH to shed light on the difference between each in estimating one day ahead Value-at-Risk (VaR). Second, to account for the non-normality in the distribution of financial markets, the paper applies Generalized Error Distribution (GED), instead of the normal distribution, to govern the innovation term. A dynamic back-testing procedure is employed to assess the performance of each model, a family of GARCH and the conditional EVT. The conclusion is that Exponential GARCH yields the best estimate in out-of-sample one day ahead Value-at-Risk (VaR) forecasting. Moreover, the discrepancy of performance between the GARCH and the conditional EVT is indistinguishable.

Keywords: Value-at-Risk, Extreme Value Theory, conditional EVT, backtesting

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Authors: Syed Aziz Rasool, Ayesha Zaman

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Poverty is one of the most important problems for any developing nation. Workers’ remittances and investment plays a crucial role in development of any country by reducing the poverty level in Pakistan. This research studies the relationship between workers’ remittances and poverty alleviation. It also focused the significant effect on poverty reduction. This study uses time series data for the period of 1972-2013. Autoregressive Distributed Lag (ARDL)Model and Error Correction (ECM)Model has been used in order to find out the long run and short run relationship between the worker’s remittances and poverty level respectively. Thus, inflow of remittances showed the significant and negative impact on poverty level. Moreover, coefficient of error correction model explains the adjustment towards convergence and it has highly significant and negative value. According to this research, Policy makers should strongly focus on positive and effective policies to attract more remittances. JELCODE: JEL: J61

Keywords: ECM, ARDL, AIC, SC

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Authors: A. Mansouri, F. Krim

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This paper presents two techniques for DC motor parameters identification. We propose a numerical method using the adaptive extensive recursive least squares (AERLS) algorithm for real time parameters estimation. This algorithm, based on minimization of quadratic criterion, is realized in simulation for parameters identification of DC motor autoregressive moving average with extra inputs (ARMAX). As advanced technique, we use genetic algorithms (GA) identification with biased estimation for high dynamic performance speed regulation. DC motors are extensively used in variable speed drives, for robot and solar panel trajectory control. GA effectiveness is derived through comparison of the two approaches.

Keywords: ARMAX model, DC motor, AERLS, GA, optimization, parameter identification, PID speed regulation

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Authors: Y. Sunecher, N. Mamode Khan, V. Jowaheer

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This paper considers the modelling of a non-stationary bivariate integer-valued autoregressive moving average of order one (BINARMA(1,1)) with correlated Poisson innovations. The BINARMA(1,1) model is specified using the binomial thinning operator and by assuming that the cross-correlation between the two series is induced by the innovation terms only. Based on these assumptions, the non-stationary marginal and joint moments of the BINARMA(1,1) are derived iteratively by using some initial stationary moments. As regards to the estimation of parameters of the proposed model, the conditional maximum likelihood (CML) estimation method is derived based on thinning and convolution properties. The forecasting equations of the BINARMA(1,1) model are also derived. A simulation study is also proposed where BINARMA(1,1) count data are generated using a multivariate Poisson R code for the innovation terms. The performance of the BINARMA(1,1) model is then assessed through a simulation experiment and the mean estimates of the model parameters obtained are all efficient, based on their standard errors. The proposed model is then used to analyse a real-life accident data on the motorway in Mauritius, based on some covariates: policemen, daily patrol, speed cameras, traffic lights and roundabouts. The BINARMA(1,1) model is applied on the accident data and the CML estimates clearly indicate a significant impact of the covariates on the number of accidents on the motorway in Mauritius. The forecasting equations also provide reliable one-step ahead forecasts.

Keywords: non-stationary, BINARMA(1, 1) model, Poisson innovations, conditional maximum likelihood, CML

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Authors: Zahid Ahmad, Nosheen Imran, Nauman Ali, Farah Amir

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The objective of the study is to forecast the US Dollar and Pak Rupee exchange rate by using time series models. For this purpose, daily exchange rates of US and Pakistan for the period of January 01, 2007 - June 2, 2017, are employed. The data set is divided into in sample and out of sample data set where in-sample data are used to estimate as well as forecast the models, whereas out-of-sample data set is exercised to forecast the exchange rate. The ADF test and PP test are used to make the time series stationary. To forecast the exchange rate ARIMA model and GARCH model are applied. Among the different Autoregressive Integrated Moving Average (ARIMA) models best model is selected on the basis of selection criteria. Due to the volatility clustering and ARCH effect the GARCH (1, 1) is also applied. Results of analysis showed that ARIMA (0, 1, 1 ) and GARCH (1, 1) are the most suitable models to forecast the future exchange rate. Further the GARCH (1,1) model provided the volatility with non-constant conditional variance in the exchange rate with good forecasting performance. This study is very useful for researchers, policymakers, and businesses for making decisions through accurate and timely forecasting of the exchange rate and helps them in devising their policies.

Keywords: exchange rate, ARIMA, GARCH, PAK/USD

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Authors: Krisada Lekdee, Sunee Sammatat, Nittaya Boonsit

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This paper proposes a GLMM with spatial and temporal effects for malaria data in Thailand. A Bayesian method is used for parameter estimation via Gibbs sampling MCMC. A conditional autoregressive (CAR) model is assumed to present the spatial effects. The temporal correlation is presented through the covariance matrix of the random effects. The malaria quarterly data have been extracted from the Bureau of Epidemiology, Ministry of Public Health of Thailand. The factors considered are rainfall and temperature. The result shows that rainfall and temperature are positively related to the malaria morbidity rate. The posterior means of the estimated morbidity rates are used to construct the malaria maps. The top 5 highest morbidity rates (per 100,000 population) are in Trat (Q3, 111.70), Chiang Mai (Q3, 104.70), Narathiwat (Q4, 97.69), Chiang Mai (Q2, 88.51), and Chanthaburi (Q3, 86.82). According to the DIC criterion, the proposed model has a better performance than the GLMM with spatial effects but without temporal terms.

Keywords: Bayesian method, generalized linear mixed model (GLMM), malaria, spatial effects, temporal correlation

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Authors: Omar Alzeley, Sergey Utev

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Minimizing a constrained multivariate function is the fundamental of Machine learning, and these algorithms are at the core of data mining and data visualization techniques. The decision function that maps input points to output points is based on the result of optimization. This optimization is the central of learning theory. One approach to complex systems where the dynamics of the system is inferred by a statistical analysis of the fluctuations in time of some associated observable is time series analysis. The purpose of this paper is a mathematical transition from the autoregressive model of classical time series to the matrix formalization of quantum theory. Firstly, we have proposed a quantum time series model (QTS). Although Hamiltonian technique becomes an established tool to detect a deterministic chaos, other approaches emerge. The quantum probabilistic technique is used to motivate the construction of our QTS model. The QTS model resembles the quantum dynamic model which was applied to financial data. Secondly, various statistical methods, including machine learning algorithms such as the Kalman filter algorithm, are applied to estimate and analyses the unknown parameters of the model. Finally, simulation techniques such as Markov chain Monte Carlo have been used to support our investigations. The proposed model has been examined by using real and simulated data. We establish the relation between quantum statistical machine and quantum time series via random matrix theory. It is interesting to note that the primary focus of the application of QTS in the field of quantum chaos was to find a model that explain chaotic behaviour. Maybe this model will reveal another insight into quantum chaos.

Keywords: machine learning, simulation techniques, quantum probability, tensor product, time series

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Authors: Manit Pollar

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Identifying the dengue epidemic periods early would be helpful to take necessary actions to prevent the dengue outbreaks. Providing an accurate prediction on dengue epidemic seasons will allow sufficient time to take the necessary decisions and actions to safeguard the situation for local authorities. This study aimed to develop a forecasting model on number of dengue incidences in Nakhon Si Thammarat Province, Southern Thailand using time series analysis. We develop Seasonal Autoregressive Moving Average (SARIMA) models on the monthly data collected between 2003-2011 and validated the models using data collected between January-September 2012. The result of this study revealed that the SARIMA(1,1,0)(1,2,1)12 model closely described the trends and seasons of dengue incidence and confirmed the existence of dengue fever cases in Nakhon Si Thammarat for the years between 2003-2011. The study showed that the one-step approach for predicting dengue incidences provided significantly more accurate predictions than the twelve-step approach. The model, even if based purely on statistical data analysis, can provide a useful basis for allocation of resources for disease prevention.

Keywords: SARIMA, time series model, dengue cases, Thailand

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Authors: Naushad Mamode Khan

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The Com-Poisson (CMP) model is one of the most popular discrete generalized linear models (GLMS) that handles both equi-, over- and under-dispersed data. In longitudinal context, an integer-valued autoregressive (INAR(1)) process that incorporates covariate specification has been developed to model longitudinal CMP counts. However, the joint likelihood CMP function is difficult to specify and thus restricts the likelihood based estimating methodology. The joint generalized quasilikelihood approach (GQL-I) was instead considered but is rather computationally intensive and may not even estimate the regression effects due to a complex and frequently ill conditioned covariance structure. This paper proposes a new GQL approach for estimating the regression parameters (GQLIII) that are based on a single score vector representation. The performance of GQL-III is compared with GQL-I and separate marginal GQLs (GQL-II) through some simulation experiments and is proved to yield equally efficient estimates as GQL-I and is far more computationally stable.

Keywords: longitudinal, com-Poisson, ill-conditioned, INAR(1), GLMS, GQL

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Authors: Oliver Takawira, Thembi Hope

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This study will analyse the relationship between Bitcoin price movements and the Johannesburg stock exchange (JSE). The aim is to determine whether Bitcoin price movements affect the stock market performance. As crypto currencies continue to gain prominence as a safe asset during periods of economic distress, this raises the question of whether Bitcoin’s prosperity could affect investment in the stock market. To identify the existence of a short run and long run linear relationship, the study will apply the Autoregressive Distributed Lag Model (ARDL) bounds test and a Vector Error Correction Model (VECM) after testing the data for unit roots and cointegration using the Augmented Dicker Fuller (ADF) and Phillips-Perron (PP). The Non-Linear Auto Regressive Distributed Lag (NARDL) will then be used to check if there is a non-linear relationship between bitcoin prices and stock market prices.

Keywords: bitcoin, stock market, interest rates, ARDL

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Authors: Amartya Hatua, Trung Nguyen, Andrew Sung

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In this paper, we study the information diffusion process on Twitter as a multivariate time series problem. Our model concerns three measures (volume, network influence, and sentiment of tweets) based on 10 features, and we collected 27 million tweets to build our information diffusion time series dataset for analysis. Then, different time series clustering techniques with Dynamic Time Warping (DTW) distance were used to identify different patterns of information diffusion. Finally, we built the information diffusion prediction models for new hashtags which comprise two phrases: The first phrase is recognizing the pattern using k-NN with DTW distance; the second phrase is building the forecasting model using the traditional Autoregressive Integrated Moving Average (ARIMA) model and the non-linear recurrent neural network of Long Short-Term Memory (LSTM). Preliminary results of performance evaluation between different forecasting models show that LSTM with clustering information notably outperforms other models. Therefore, our approach can be applied in real-world applications to analyze and predict the information diffusion characteristics of selected topics or memes (hashtags) in Twitter.

Keywords: ARIMA, DTW, information diffusion, LSTM, RNN, time series clustering, time series forecasting, Twitter

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Authors: Jihène Khalifa

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This study analyzed the relationships between Tunisia’s economic growth, food security, agricultural productivity, and climate change using the ARDL model for the period from 1990 to 2022. The ARDL model reveals a positive correlation between economic growth and lagged agricultural productivity. Additionally, the vector autoregressive (VAR) model highlights the beneficial impact of lagged agricultural productivity on economic growth and the negative effect of rainfall on economic growth. Granger causality analysis identifies unidirectional relationships from economic growth to agricultural productivity, crop production, food security, and temperature variations, as well as from temperature variations to crop production. Furthermore, a bidirectional causality is established between crop production and food security. The study underscores the impact of climate change on crop production and suggests the need for adaptive strategies to mitigate these climate effects.

Keywords: economic growth, climate change, agriculture, ARDL, Granger causality, VAR

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Authors: Hueiwang Anna Jeng, Norou Diawara, Nancy Welch, Cynthia Jackson, Rekha Singh, Kyle Curtis, Raul Gonzalez, David Jurgens, Sasanka Adikari

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Modeling effort is needed to predict the COVID-19 trends for developing management strategies and adaptation measures. The objective of this study was to assess whether SARS-CoV-2 viral load in wastewater could serve as a predictor for forecasting COVID-19 cases, hospitalization cases, and death cases using copula-based time series modeling. SARS-CoV-2 RNA load in raw wastewater in Chesapeake VA was measured using the RT-qPCR method. Gaussian copula time series marginal regression model, incorporating an autoregressive moving average model and the copula function, served as a forecasting model. COVID-19 cases were correlated with wastewater viral load, hospitalization cases, and death cases. The forecasted trend of COVID-19 cases closely paralleled one of the reported cases, with over 90% of the forecasted COVID-19 cases falling within the 99% confidence interval of the reported cases. Wastewater SARS-CoV-2 viral load could serve as a predictor for COVID-19 cases and hospitalization cases.

Keywords: COVID-19, modeling, time series, copula function

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Authors: Andres F. Ramirez, Carlos F. Valencia

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The increasing interest in renewable energies strategies application and the path for diminishing the use of carbon related energy sources have encouraged the development of novel strategies for integration of solar energy into the electricity network. A correct inclusion of the fluctuating energy output of a photovoltaic (PV) energy system into an electric grid requires improvements in the forecasting and simulation methodologies for solar energy potential, and the understanding not only of the mean value of the series but the associated underlying stochastic process. We present a methodology for synthetic generation of solar irradiance (shortwave flux) and air temperature bivariate time series based on copula functions to represent the cross-dependence and temporal structure of the data. We explore the advantages of using this nonlinear time series method over traditional approaches that use a transformation of the data to normal distributions as an intermediate step. The use of copulas gives flexibility to represent the serial variability of the real data on the simulation and allows having more control on the desired properties of the data. We use discrete zero mass density distributions to assess the nature of solar irradiance, alongside vector generalized linear models for the bivariate time series time dependent distributions. We found that the copula autoregressive methodology used, including the zero mass characteristics of the solar irradiance time series, generates a significant improvement over state of the art strategies. These results will help to better understand the fluctuating nature of solar energy forecasting, the underlying stochastic process, and quantify the potential of a photovoltaic (PV) energy generating system integration into a country electricity network. Experimental analysis and real data application substantiate the usage and convenience of the proposed methodology to forecast solar irradiance time series and solar energy across northern hemisphere, southern hemisphere, and equatorial zones.

Keywords: copula autoregressive, solar irradiance forecasting, solar energy forecasting, time series generation

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Authors: Manoel Pereira, Alvaro Veiga, Camila Epprecht, Renato Costa

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This paper introduces an empirical version of the Esscher transform for risk-neutral option pricing. Traditional parametric methods require the formulation of an explicit risk-neutral model and are operational only for a few probability distributions for the returns of the underlying. In our proposal, we make only mild assumptions on the pricing kernel and there is no need for the formulation of the risk-neutral model for the returns. First, we simulate sample paths for the returns under the physical distribution. Then, based on the empirical Esscher transform, the sample is reweighted, giving rise to a risk-neutralized sample from which derivative prices can be obtained by a weighted sum of the options pay-offs in each path. We compare our proposal with some traditional parametric pricing methods in four experiments with artificial and real data.

Keywords: esscher transform, generalized autoregressive Conditional Heteroscedastic (GARCH), nonparametric option pricing

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Authors: Gajaanuja Megalathan, Banuka Athuraliya

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Crime is one of our society's most intimidating and threatening challenges. With the majority of the population residing in cities, many experts and data provided by local authorities suggest a rapid increase in the number of crimes committed in these cities in recent years. There has been an increasing graph in the crime rates. People living in Sri Lanka have the right to know the exact crime rates and the crime rates in the future of the place they are living in. Due to the current economic crisis, crime rates have spiked. There have been so many thefts and murders recorded within the last 6-10 months. Although there are many sources to find out, there is no solid way of searching and finding out the safety of the place. Due to all these reasons, there is a need for the public to feel safe when they are introduced to new places. Through this research, the author aims to develop a mobile application that will be a solution to this problem. It is mainly targeted at tourists, and people who recently relocated will gain advantage of this application. Moreover, the Arima Model combined with ANN is to be used to predict crime rates. From the past researchers' works, it is evidently clear that they haven’t used the Arima model combined with Artificial Neural Networks to forecast crimes.

Keywords: arima model, ANN, crime prediction, data analysis

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Authors: Evelyn Nwamaka Ogbeide-Osaretin, Bright Orhewere

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This study examined the role of the population in the linkage between energy consumption and economic development in Nigeria. Time series data on energy consumption, population, and economic development were used for the period 1995 to 2020. The Autoregressive Distributed Lag -Error Correction Model (ARDL-ECM) was engaged. Economic development had a negative substantial impact on energy consumption in the long run. Population growth had a positive significant effect on energy consumption. Government expenditure was also found to impact the level of energy consumption, while energy consumption is not a function of oil price in Nigeria.

Keywords: dynamic analysis, energy consumption, population, economic development, Nigeria

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Authors: Kanokwan Chancharoenchai

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Economic growth can be considered as an important element of countries’ development process. For developing countries, like Thailand, to ensure the continuous growth of the economy, the Thai government usually implements various policies to stimulate economic growth. They may take the form of fiscal, monetary, trade, and other policies. Because of these different aspects, understanding factors relating to economic growth could allow the government to introduce the proper plan for the future economic stimulating scheme. Consequently, this issue has caught interest of not only policymakers but also academics. This study, therefore, investigates explanatory variables for economic growth in Thailand from 2005 to 2017 with a total of 52 quarters. The findings would contribute to the field of economic growth and become helpful information to policymakers. The investigation is estimated throughout the production function with non-linear Cobb-Douglas equation. The rate of growth is indicated by the change of GDP in the natural logarithmic form. The relevant factors included in the estimation cover three traditional means of production and implicit effects, such as human capital, international activity and technological transfer from developed countries. Besides, this investigation takes the internal and external instabilities into account as proxied by the unobserved inflation estimation and the real effective exchange rate (REER) of the Thai baht, respectively. The unobserved inflation series are obtained from the AR(1)-ARCH(1) model, while the unobserved REER of Thai baht is gathered from naive OLS-GARCH(1,1) model. According to empirical results, the AR(|2|) equation which includes seven significant variables, namely capital stock, labor, the imports of capital goods, trade openness, the REER of Thai baht uncertainty, one previous GDP, and the world financial crisis in 2009 dummy, presents the most suitable model. The autoregressive model is assumed constant estimator that would somehow cause the unbias. However, this is not the case of the recursive coefficient model from the state space model that allows the transition of coefficients. With the powerful state space model, it provides the productivity or effect of each significant factor more in detail. The state coefficients are estimated based on the AR(|2|) with the exception of the one previous GDP and the 2009 world financial crisis dummy. The findings shed the light that those factors seem to be stable through time since the occurrence of the world financial crisis together with the political situation in Thailand. These two events could lower the confidence in the Thai economy. Moreover, state coefficients highlight the sluggish rate of machinery replacement and quite low technology of capital goods imported from abroad. The Thai government should apply proactive policies via taxation and specific credit policy to improve technological advancement, for instance. Another interesting evidence is the issue of trade openness which shows the negative transition effect along the sample period. This could be explained by the loss of price competitiveness to imported goods, especially under the widespread implementation of free trade agreement. The Thai government should carefully handle with regulations and the investment incentive policy by focusing on strengthening small and medium enterprises.

Keywords: autoregressive model, economic growth, state space model, Thailand

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Authors: Xu Wang

Abstract:

This research builds linear regressions of U.S. macroeconomic condition and volatility measures in the investment grade and high yield Credit Default Swap index spreads using monthly data from March 2009 to July 2016, to study the relationship between different dimensions of macroeconomy and overall credit risk quality. The most significant contribution of this research is systematically examining individual and joint effects of macroeconomic condition and volatility on CDX spreads by including macroeconomic time series that captures different dimensions of the U.S. economy. The industrial production index growth, non-farm payroll growth, consumer price index growth, 3-month treasury rate and consumer sentiment are introduced to capture the condition of real economic activity, employment, inflation, monetary policy and risk aversion respectively. The conditional variance of the macroeconomic series is constructed using ARMA-GARCH model and is used to measure macroeconomic volatility. The linear regression model is conducted to capture relationships between monthly average CDX spreads and macroeconomic variables. The Newey–West estimator is used to control for autocorrelation and heteroskedasticity in error terms. Furthermore, the sensitivity factor analysis and standardized coefficients analysis are conducted to compare the sensitivity of CDX spreads to different macroeconomic variables and to compare relative effects of macroeconomic condition versus macroeconomic uncertainty respectively. This research shows that macroeconomic condition can have a negative effect on CDX spread while macroeconomic volatility has a positive effect on determining CDX spread. Macroeconomic condition and volatility variables can jointly explain more than 70% of the whole variation of the CDX spread. In addition, sensitivity factor analysis shows that the CDX spread is the most sensitive to Consumer Sentiment index. Finally, the standardized coefficients analysis shows that both macroeconomic condition and volatility variables are important in determining CDX spread but macroeconomic condition category of variables have more relative importance in determining CDX spread than macroeconomic volatility category of variables. This research shows that the CDX spread can reflect the individual and joint effects of macroeconomic condition and volatility, which suggests that individual investors or government should carefully regard CDX spread as a measure of overall credit risk because the CDX spread is influenced by macroeconomy. In addition, the significance of macroeconomic condition and volatility variables, such as Non-farm Payroll growth rate and Industrial Production Index growth volatility suggests that the government, should pay more attention to the overall credit quality in the market when macroecnomy is low or volatile.

Keywords: autoregressive moving average model, credit spread puzzle, credit default swap spread, generalized autoregressive conditional heteroskedasticity model, macroeconomic conditions, macroeconomic uncertainty

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