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J. Risk Financial Manag. 2018, 11(3), 37; https://doi.org/10.3390/jrfm11030037

Nonlinear Time Series Modeling: A Unified Perspective, Algorithm and Application

1
Department of Statistical Science, Temple University, Philadelphia, PA 19122, USA
2
Department of Statistics, Texas A&M University, College Station, TX 77843, USA
Shortly after finishing the first draft of this paper, Manny Parzen passed away. Deceased 6 February 2016.
*
Author to whom correspondence should be addressed.
Received: 4 June 2018 / Accepted: 3 July 2018 / Published: 6 July 2018
(This article belongs to the Special Issue Applied Econometrics)
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Abstract

A new comprehensive approach to nonlinear time series analysis and modeling is developed in the present paper. We introduce novel data-specific mid-distribution-based Legendre Polynomial (LP)-like nonlinear transformations of the original time series {Y(t)} that enable us to adapt all the existing stationary linear Gaussian time series modeling strategies and make them applicable to non-Gaussian and nonlinear processes in a robust fashion. The emphasis of the present paper is on empirical time series modeling via the algorithm LPTime. We demonstrate the effectiveness of our theoretical framework using daily S&P 500 return data between 2 January 1963 and 31 December 2009. Our proposed LPTime algorithm systematically discovers all the ‘stylized facts’ of the financial time series automatically, all at once, which were previously noted by many researchers one at a time. View Full-Text
Keywords: nonparametric time series modeling; nonlinearity; unified time series algorithm; exploratory diagnostics nonparametric time series modeling; nonlinearity; unified time series algorithm; exploratory diagnostics
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Mukhopadhyay, S.; Parzen, E. Nonlinear Time Series Modeling: A Unified Perspective, Algorithm and Application. J. Risk Financial Manag. 2018, 11, 37.

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