[PDF][PDF] Locally adaptive factor processes for multivariate time series

D Durante, B Scarpa, DB Dunson - The Journal of Machine Learning …, 2014 - jmlr.org
The Journal of Machine Learning Research, 2014jmlr.org
In modeling multivariate time series, it is important to allow time-varying smoothness in the
mean and covariance process. In particular, there may be certain time intervals exhibiting
rapid changes and others in which changes are slow. If such time-varying smoothness is not
accounted for, one can obtain misleading inferences and predictions, with over-smoothing
across erratic time intervals and under-smoothing across times exhibiting slow variation.
This can lead to mis-calibration of predictive intervals, which can be substantially too narrow …
Abstract
In modeling multivariate time series, it is important to allow time-varying smoothness in the mean and covariance process. In particular, there may be certain time intervals exhibiting rapid changes and others in which changes are slow. If such time-varying smoothness is not accounted for, one can obtain misleading inferences and predictions, with over-smoothing across erratic time intervals and under-smoothing across times exhibiting slow variation. This can lead to mis-calibration of predictive intervals, which can be substantially too narrow or wide depending on the time. We propose a locally adaptive factor process for characterizing multivariate mean-covariance changes in continuous time, allowing locally varying smoothness in both the mean and covariance matrix. This process is constructed utilizing latent dictionary functions evolving in time through nested Gaussian processes and linearly related to the observed data with a sparse mapping. Using a differential equation representation, we bypass usual computational bottlenecks in obtaining MCMC and online algorithms for approximate Bayesian inference. The performance is assessed in simulations and illustrated in a financial application.
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