Preface xvii
1. Introduction To Big Dependent Data 1
1.1 Examples of Dependent Data 2
1.2 Stochastic Processes 9
1.2.1 Scalar Processes 9
1.2.1.1 Stationarity 10
1.2.1.2 White Noise Process 12
1.2.1.3 Conditional Distribution 12
1.2.2 Vector Processes 12
1.2.2.1 Vector White Noises 15
1.2.2.2 Invertibility 15
1.3 Sample Moments of Stationary Vector Process 15
1.3.1 Sample Mean 16
1.3.2 Sample Covariance and Correlation Matrices 17
1.4 Nonstationary Processes 21
1.5 Principal Component Analysis 23
1.5.1 Discussion 26
1.5.2 Properties of the PCs 27
1.6 Effects of Serial Dependence 31
Appendix 1.A: Some Matrix Theory 34
Exercises 35
References 36
2. Linear Univariate Time Series 37
2.1 Visualizing a Large Set of Time Series 39
2.1.1 Dynamic Plots 39
2.1.2 Static Plots 44
2.2 Stationary ARMA Models 49
2.2.1 The Autoregressive Process 50
2.2.1.1 Autocorrelation Functions 51
2.2.2 The Moving Average Process 52
2.2.3 The ARMA Process 54
2.2.4 Linear Combinations of ARMA Processes 55
2.3 Spectral Analysis of Stationary Processes 58
2.3.1 Fitting Harmonic Functions to a Time Series 58
2.3.2 The Periodogram 59
2.3.3 The Spectral Density Function and Its Estimation 61
2.4 Integrated Processes 64
2.4.1 The Random Walk Process 64
2.4.2 ARIMA Models 65
2.4.3 Seasonal ARIMA Models 67
2.4.3.1 The Airline Model 69
2.5 Structural and State Space Models 71
2.5.1 Structural Time Series Models 71
2.5.2 State-Space Models 72
2.5.3 The Kalman Filter 76
2.6 Forecasting with Linear Models 78
2.6.1 Computing Optimal Predictors 78
2.6.2 Variances of the Predictions 80
2.6.3 Measuring Predictability 81
2.7 Modeling a Set of Time Series 82
2.7.1 Data Transformation 83
2.7.2 Testing forWhite Noise 85
2.7.3 Determination of the Difference Order 85
2.7.4 Model Identification 87
2.8 Estimation and Information Criteria 87
2.8.1 Conditional Likelihood 87
2.8.2 On-line Estimation 88
2.8.3 Maximum Likelihood (ML) Estimation 90
2.8.4 Model Selection 91
2.8.4.1 The Akaike Information Criterion (AIC) 91
2.8.4.2 The Bayesian Information Criterion (BIC) 92
2.8.4.3 Other Criteria 92
2.8.4.4 Cross-Validation 93
2.9 Diagnostic Checking 95
2.9.1 Residual Plot 96
2.9.2 Portmanteau Test for Residual Serial Correlations 96
2.9.3 Homoscedastic Tests 97
2.9.4 Normality Tests 98
2.9.5 Checking for Deterministic Components 98
2.10 Forecasting 100
2.10.1 Out-of-Sample Forecasts 100
2.10.2 Forecasting with Model Averaging 100
2.10.3 Forecasting with Shrinkage Estimators 102
Appendix 2.A: Difference Equations 103
Exercises 108
References 108
3. Analysis of Multivariate Time Series 111
3.1 Transfer Function Models 112
3.1.1 Single Input and Single Output 112
3.1.2 Multiple Inputs and Multiple Outputs 118
3.2 Vector AR Models 118
3.2.1 Impulse Response Function 120
3.2.2 Some Special Cases 121
3.2.3 Estimation 122
3.2.4 Model Building 123
3.2.5 Prediction 125
3.2.6 Forecast Error Variance Decomposition 127
3.3 Vector Moving-Average Models 135
3.3.1 Properties of VMA Models 136
3.3.2 VMA Modeling 136
3.4 Stationary VARMA Models 140
3.4.1 Are VAR Models Sufficient? 140
3.4.2 Properties of VARMA Models 141
3.4.3 Modeling VARMA Process 141
3.4.4 Use of VARMA Models 142
3.5 Unit Roots and Co-Integration 147
3.5.1 Spurious Regression 148
3.5.2 Linear Combinations of a Vector Process 148
3.5.3 Co-integration 149
3.5.4 Over-Differencing 150
3.6 Error-Correction Models 151
3.6.1 Co-integration Test 152
Exercises 157
References 157
4. Handling Heterogeneity In Many Time Series 161
4.1 Intervention Analysis 162
4.1.1 Intervention with Indicator Variables 163
4.1.2 Intervention with Step Functions 165
4.1.3 Intervention with General Exogenous Variables 166
4.1.4 Building an Intervention Model 166
4.2 Estimation of Missing Values 170
4.2.1 Univariate Interpolation 170
4.2.2 Multivariate Interpolation 172
4.3 Outliers in Vector Time Series 174
4.3.1 Multivariate Additive Outliers 175
4.3.1.1 Effects on Residuals and Estimation 176
4.3.2 Multivariate Level Shift or Structural Break 177
4.3.2.1 Effects on Residuals and Estimation 177
4.3.3 Other Types of Outliers 178
4.3.3.1 Multivariate Innovative Outliers 178
4.3.3.2 Transitory Change 179
4.3.3.3 Ramp Shift 179
4.3.4 Masking and Swamping 180
4.4 Univariate Outlier Detection 180
4.4.1 Other Procedures for Univariate Outlier Detection 183
4.4.2 New Approaches to Outlier Detection 184
4.5 Multivariate Outliers Detection 189
4.5.1 VARMA Outlier Detection 189
4.5.2 Outlier Detection by Projections 190
4.5.3 A Projection Algorithm for Outliers Detection 192
4.5.4 The Nonstationary Case 193
4.6 Robust Estimation 196
4.7 Heterogeneity for Parameter Changes 199
4.7.1 Parameter Changes in Univariate Time Series 199
4.7.2 Covariance Changes in Multivariate Time Series 200
4.7.2.1 Detecting Multiple Covariance Changes 202
4.7.2.2 LR Test 202
Appendix 4.A: Cusum Algorithms 204
4.A.1 Detecting Univariate LS 204
4.A.2 Detecting Multivariate Level Shift 204
4.A.3 Detecting Multiple Covariance Changes 206
Exercises 206
References 207
5. Clustering and Classification of Time Series 211
5.1 Distances and Dissimilarities 212
5.1.1 Distance Between Univariate Time Series 212
5.1.2 Dissimilarities Between Univariate Series 215
5.1.3 Dissimilarities Based on Cross-Linear Dependency 222
5.2 Hierarchical Clustering of Time Series 228
5.2.1 Criteria for Defining Distances Between Groups 228
5.2.2 The Dendrogram 229
5.2.3 Selecting the Number of Groups 229
5.2.3.1 The Height and Step Plots 229
5.2.3.2 Silhouette Statistic 230
5.2.3.3 The Gap Statistic 233
5.3 Clustering by Variables 243
5.3.1 The k-means Algorithm 244
5.3.1.1 Number of Groups 246
5.3.2 k-Medoids 250
5.3.3 Model-Based Clustering by Variables 252
5.3.3.1 Maximum Likelihood (ML) Estimation of the AR Mixture Model 253
5.3.3.2 The EM Algorithm 254
5.3.3.3 Estimation of Mixture of Multivariate Normals 256
5.3.3.4 Bayesian Estimation 257
5.3.3.5 Clustering with Structural Breaks 258
5.3.4 Clustering by Projections 259
5.4 Classification with Time Series 264
5.4.1 Classification Among a Set of Models 264
5.4.2 Checking the Classification Rule 267
5.5 Classification with Features 267
5.5.1 Linear Discriminant Function 268
5.5.2 Quadratic Classification and Admissible Functions 269
5.5.3 Logistic Regression 270
5.6 Nonparametric Classification 277
5.6.1 Nearest Neighbors 277
5.6.2 Support Vector Machines 278
5.6.2.1 Linearly Separable Problems 279
5.6.2.2 Nonlinearly Separable Problems 282
5.6.3 Density Estimation 284
5.7 Other Classification Problems and Methods 286
Exercises 287
References 288
6. Dynamic Factor Models 291
6.1 The DFM for Stationary Series 293
6.1.1 Properties of the Covariance Matrices 295
6.1.1.1 The Exact DFM 295
6.1.1.2 The Approximate DFM 297
6.1.2 Dynamic Factor and VARMA Models 299
6.2 Fitting a Stationary DFM to Data 301
6.2.1 Principal Components (PC) Estimation 301
6.2.2 Pooled PC Estimator 303
6.2.3 Generalized PC Estimator 303
6.2.4 ML Estimation 304
6.2.5 Selecting the Number of Factors 305
6.2.5.1 Rank Testing via Canonical Correlation 306
6.2.5.2 Testing a Jump in Eigenvalues 307
6.2.5.3 Using Information Criteria 307
6.2.6 Forecasting with DFM 308
6.2.7 Alternative Formulations of the DFM 314
6.3 Generalized DFM (GDFM) for Stationary Series 315
6.3.1 Some Properties of the GDFM 316
6.3.2 GDFM and VARMA Models 317
6.4 Dynamic Principal Components 317
6.4.1 Dynamic Principal Components for Optimal Reconstruction 317
6.4.2 One-Sided DPCs 318
6.4.3 Model Selection and Forecasting 320
6.4.4 One Sided DPC and GDFM Estimation 321
6.5 DFM for Nonstationary Series 324
6.5.1 Cointegration and DFM 329
6.6 GDFM for Nonstationary Series 330
6.6.1 Estimation by Generalized DPC 330
6.7 Outliers in DFMs 333
6.7.1 Factor and Idiosyncratic Outliers 333
6.7.2 A Procedure to Find Outliers in DFM 335
6.8 DFM with Cluster Structure 336
6.8.1 Fitting DFMCS 337
6.9 Some Extensions of DFM 344
6.10 High-Dimensional Case 345
6.10.1 Sparse PCs 345
6.10.2 A Structural-FM Approach 347
6.10.3 Estimation 348
6.10.4 Selecting the Number of Common Factors 349
6.10.5 Asymptotic Properties of Loading Estimates 351
Appendix 6.A: Some R Commands 352
Exercises 353
References 354
7. Forecasting With Big Dependent Data 359
7.1 Regularized Linear Models 360
7.1.1 Properties of Lasso Estimator 362
7.1.2 Some Extensions of Lasso Regression 366
7.1.2.1 Adaptive Lasso 367
7.1.2.2 Group Lasso 367
7.1.2.3 Elastic Net 368
7.1.2.4 Fused Lasso 368
7.1.2.5 SCAD Penalty 368
7.2 Impacts of Dynamic Dependence on Lasso 377
7.3 Lasso for Dependent Data 383
7.4 Principal Component Regression and Diffusion Index 388
7.5 Partial Least Squares 392
7.6 Boosting 397
7.6.1 ?2 Boosting 399
7.6.2 Choices of Weak Learner 399
7.6.3 Boosting for Classification 403
7.7 Mixed-Frequency Data and Nowcasting 404
7.7.1 Midas Regression 405
7.7.2 Nowcasting 406
7.8 Strong Serial Dependence 413
Exercises 414
References 414
8. Machine Learning of Big Dependent Data 419
8.1 Regression Trees and Random Forests 420
8.1.1 Growing Tree 420
8.1.2 Pruning 422
8.1.3 Classification Trees 422
8.1.4 Random Forests 424
8.2 Neural Networks 427
8.2.1 Network Training 429
8.3 Deep Learning 436
8.3.1 Types of Deep Networks 436
8.3.2 Recurrent NN 437
8.3.3 Activation Functions for Deep Learning 439
8.3.4 Training Deep Networks 440
8.3.4.1 Long Short-Term Memory Model 440
8.3.4.2 Training Algorithm 441
8.4 Some Applications 442
8.4.1 The Package: keras 442
8.4.2 Dropout Layer 449
8.4.3 Application of Convolution Networks 450
8.4.4 Application of LSTM 457
8.5 Deep Generative Models 466
8.6 Reinforcement Learning 466
Exercises 467
References 468
9. Spatio-Temporal Dependent Data 471
9.1 Examples and Visualization of Spatio Temporal Data 472
9.2 Spatial Processes and Data Analysis 477
9.3 Geostatistical Processes 479
9.3.1 Stationary Variogram 480
9.3.2 Examples of Semivariogram 480
9.3.3 Stationary Covariance Function 482
9.3.4 Estimation of Variogram 483
9.3.5 Testing Spatial Dependence 483
9.3.6 Kriging 484
9.3.6.1 Simple Kriging 484
9.3.6.2 Ordinary Kriging 486
9.3.6.3 Universal Kriging 487
9.4 Lattice Processes 488
9.4.1 Markov-Type Models 488
9.5 Spatial Point Processes 491
9.5.1 Second-Order Intensity 492
9.6 S-T Processes and Analysis 495
9.6.1 Basic Properties 496
9.6.2 Some Nonseparable Covariance Functions 498
9.6.3 S-T Variogram 499
9.6.4 S-T Kriging 500
9.7 Descriptive S-T Models 504
9.7.1 Random Effects with S-T Basis Functions 505
9.7.2 Random Effects with Spatial Basis Functions 506
9.7.3 Fixed Rank Kriging 507
9.7.4 Spatial Principal Component Analysis 510
9.7.5 Random Effects with Temporal Basis Functions 514
9.8 Dynamic S-T Models 519
9.8.1 Space-Time Autoregressive Moving-Average Models 520
9.8.2 S-T Component Models 521
9.8.3 S-T Factor Models 521
9.8.4 S-T HMs 522
Appendix 9.A: Some R Packages and Commands 523
Exercises 525
References 525
Index 529
