Monitoring Processes with Changing Variances
AbstractStatistical process control (SPC) has evolved beyond its classical applications in manufacturing to monitoring economic and social phenomena. This extension requires consideration of autocorrelated and possibly non-stationary time series. Less attention has been paid to the possibility that the variance of the process may also change over time. In this paper we use the innovations state space modeling framework to develop conditionally heteroscedastic models. We provide examples to show that the incorrect use of homoscedastic models may lead to erroneous decisions about the nature of the process. The framework is extended to include counts data, when we also introduce a new type of chart, the P-value chart, to accommodate the changes in distributional form from one period to the next.
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Bibliographic InfoPaper provided by Monash University, Department of Econometrics and Business Statistics in its series Monash Econometrics and Business Statistics Working Papers with number 4/08.
Length: 26 pages
Date of creation: 2008
Date of revision:
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Postal: PO Box 11E, Monash University, Victoria 3800, Australia
Web page: http://www.buseco.monash.edu.au/depts/ebs/
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- C1 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General
- C5 - Mathematical and Quantitative Methods - - Econometric Modeling
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