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Extended residual coherence with a financial application

Author

Listed:
  • Zhang Xuze

    (Department of Mathematics and Institute for Systems Research, University of Maryland, Maryland, ; United States)

  • Kedem Benjamin

    (Department of Mathematics and Institute for Systems Research, University of Maryland, Maryland, ; United States .)

Abstract

Residual coherence is a graphical tool for selecting potential second-order interaction terms as functions of a single time series and its lags. This paper extends the notion of residual coherence to account for interaction terms of multiple time series. Moreover, an alternative criterion, integrated spectrum, is proposed to facilitate this graphical selection. A financial market application shows that new insights can be gained regarding implied market volatility.

Suggested Citation

  • Zhang Xuze & Kedem Benjamin, 2021. "Extended residual coherence with a financial application," Statistics in Transition New Series, Polish Statistical Association, vol. 22(2), pages 1-14, June.
    • Handle: RePEc:vrs:stintr:v:22:y:2021:i:2:p:1-14:n:5
    DOI: 10.21307/stattrans-2021-014
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    References listed on IDEAS

    as
    1. Benjamin Kedem & Konstantinos Fokianos, 2002. "Regression Models for Binary Time Series," International Series in Operations Research & Management Science, in: Moshe Dror & Pierre L’Ecuyer & Ferenc Szidarovszky (ed.), Modeling Uncertainty, chapter 0, pages 185-199, Springer.
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