0
votes
1answer
71 views

Can we model components in a set of multivariate multi-period time-series data?

There are N data sets in periods occurring weekly/monthly, across a 10-year historical timeline. In each period, five dates are observed (labelled a to e), where a denotes the day the period ...
5
votes
2answers
153 views

Multifractal Model, Generating Sample Paths with Correlations between Assets

I have studied option pricing using Geometric Brownian Motion to generate sample paths. Because of the normal distribution, it is easy to create a covariance matrix and get correlated asset returns. ...
2
votes
0answers
146 views

Potential pitfalls in the use of correlation

Background: The red line is an index, which goes from 0 to 100, measuring uncertainty in the markets. The dark blue line is a price index, which has a lower bound at 0, and virtually no upper bound. ...
0
votes
0answers
188 views

Time-varying correlation via state-space representation and Kalman filter

Let a linear time-varying mode like this one: $y_{t}=\alpha_{t}+\beta_{t}x_{t}+\epsilon_{t}$. You can also suppress the constant term to simplify this example: $y_{t}=\beta_{t}x_{t}+\epsilon_{t}$. ...
1
vote
1answer
260 views

Help with understanding a normal distribution/probability question

Could someone please help me translate what this is saying on page P15, section 4.2: http://www.ntuzov.com/Nik_Site/Niks_files/Research/papers/stat_arb/Ahmed_2009.pdf Specifically: When the ...
2
votes
1answer
457 views

Counterintuitive time varying Beta with Kalman filter

If you're used to play with R, you'll enjoy the following reproducible code: ...
6
votes
2answers
246 views

How to deal with zeroes in returns?

Suppose there are two time series that I want to analyze and compare. However, many, or most, of the data are zeroes for some reason. For example, consider a pair of intraday trading returns time ...
5
votes
0answers
271 views

Alternative ways to understand time-varying comovement between two time-series?

I have been looking into ways to better understand how the dependencies/correlations/etc between two time series can vary over time. I first thought about using a Kalman/particle filter over a ...
10
votes
1answer
505 views

Meta-view of different time-series similarity measures?

While I spend most of my StackExchange time on MathematicaSE, I'm in the business and follow the questions and answers on this site with great interest. Recently questions like the following (and ...
10
votes
6answers
1k views

How to generate a random price series with a specified range and correlation with an actual price?

I want to generate a mock price series. I want it to be within a certain range and have a defined correlation with the original price series. If I choose, say, oil, I want as many time series which ...
11
votes
3answers
970 views

How to detect regime change when estimating asset correlation from historical time series?

Suppose I have two asset time series, $X_t$ and $Y_t$, and I'm estimating their correlation from historical data. I'd like to apply some systematic criterion to estimate what time window I should use ...
27
votes
5answers
3k views

How do I graphically represent the evolution of a covariance matrix over time?

I am working with a set of covariance matrices evaluated at various points in time over some history. Each covariance matrix is $N\times N$ for $N$ financial time-series over $T$ periods. I would ...
25
votes
6answers
7k views

How are correlation and cointegration related?

In what ways (and under what circumstances) are correlation and cointegration related, if at all? One difference is that one usually thinks of correlation in terms of returns and cointegration in ...
18
votes
6answers
3k views

Time-series similarity measures

Suppose I have two time series $X$ and $Y$ of stock prices. How do I measure the "similarity" of $X$ and $Y$? (I'm being deliberately vague as I don't have a particular application, and I'm curious ...
17
votes
2answers
1k views

How to quickly estimate a lower bound on correlation for a large number of stocks?

I would like to find stock pairs that exhibit low correlation. If the correlation between A and B is 0.9 and the correlation between A and C is 0.9 is there a minimum possible correlation for B and C? ...