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Learning from the past, predicting the statistics for the future, learning an evolving system

Author

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  • Daniel Levin
  • Terry Lyons
  • Hao Ni

Abstract

We bring the theory of rough paths to the study of non-parametric statistics on streamed data. We discuss the problem of regression where the input variable is a stream of information, and the dependent response is also (potentially) a stream. A certain graded feature set of a stream, known in the rough path literature as the signature, has a universality that allows formally, linear regression to be used to characterise the functional relationship between independent explanatory variables and the conditional distribution of the dependent response. This approach, via linear regression on the signature of the stream, is almost totally general, and yet it still allows explicit computation. The grading allows truncation of the feature set and so leads to an efficient local description for streams (rough paths). In the statistical context this method offers potentially significant, even transformational dimension reduction. By way of illustration, our approach is applied to stationary time series including the familiar AR model and ARCH model. In the numerical examples we examined, our predictions achieve similar accuracy to the Gaussian Process (GP) approach with much lower computational cost especially when the sample size is large.

Suggested Citation

  • Daniel Levin & Terry Lyons & Hao Ni, 2013. "Learning from the past, predicting the statistics for the future, learning an evolving system," Papers 1309.0260, arXiv.org, revised Mar 2016.
  • Handle: RePEc:arx:papers:1309.0260
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    References listed on IDEAS

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    1. Tim Bollerslev, 2008. "Glossary to ARCH (GARCH)," CREATES Research Papers 2008-49, Department of Economics and Business Economics, Aarhus University.
    2. Bollerslev, Tim, 1986. "Generalized autoregressive conditional heteroskedasticity," Journal of Econometrics, Elsevier, vol. 31(3), pages 307-327, April.
    3. Engle, Robert F, 1982. "Autoregressive Conditional Heteroscedasticity with Estimates of the Variance of United Kingdom Inflation," Econometrica, Econometric Society, vol. 50(4), pages 987-1007, July.
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    Cited by:

    1. Erdinc Akyildirim & Matteo Gambara & Josef Teichmann & Syang Zhou, 2022. "Applications of Signature Methods to Market Anomaly Detection," Papers 2201.02441, arXiv.org, revised Feb 2022.
    2. Guy P. Nason & Ben Powell & Duncan Elliott & Paul A. Smith, 2017. "Should we sample a time series more frequently?: decision support via multirate spectrum estimation," Journal of the Royal Statistical Society Series A, Royal Statistical Society, vol. 180(2), pages 353-407, February.
    3. Lajos Gergely Gyurk'o & Terry Lyons & Mark Kontkowski & Jonathan Field, 2013. "Extracting information from the signature of a financial data stream," Papers 1307.7244, arXiv.org, revised Jul 2014.
    4. Hans Buhler & Blanka Horvath & Terry Lyons & Imanol Perez Arribas & Ben Wood, 2020. "A Data-driven Market Simulator for Small Data Environments," Papers 2006.14498, arXiv.org.
    5. Stefanos Bennett & Mihai Cucuringu & Gesine Reinert, 2022. "Lead-lag detection and network clustering for multivariate time series with an application to the US equity market," Papers 2201.08283, arXiv.org.

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