Electronic Journal of Statistics

Trimmed Granger causality between two groups of time series

Ying-Chao Hung, Neng-Fang Tseng, and Narayanaswamy Balakrishnan

Full-text: Open access

Abstract

The identification of causal effects between two groups of time series has been an important topic in a wide range of applications such as economics, engineering, medicine, neuroscience, and biology. In this paper, a simplified causal relationship (called trimmed Granger causality) based on the context of Granger causality and vector autoregressive (VAR) model is introduced. The idea is to characterize a subset of “important variables” for both groups of time series so that the underlying causal structure can be presented based on minimum variable information. When the VAR model is specified, explicit solutions are provided for the identification of important variables. When the parameters of the VAR model are unknown, an efficient statistical hypothesis testing procedure is introduced to estimate the solution. An example representing the stock indices of different countries is used to illustrate the proposed methods. In addition, a simulation study shows that the proposed methods significantly outperform the Lasso-type methods in terms of the accuracy of characterizing the simplified causal relationship.

Article information

Source
Electron. J. Statist., Volume 8, Number 2 (2014), 1940-1972.

Dates
First available in Project Euclid: 29 October 2014

Permanent link to this document
https://projecteuclid.org/euclid.ejs/1414588183

Digital Object Identifier
doi:10.1214/14-EJS940

Mathematical Reviews number (MathSciNet)
MR3273615

Zentralblatt MATH identifier
1302.62196

Subjects
Primary: 62M10: Time series, auto-correlation, regression, etc. [See also 91B84] 62F03: Hypothesis testing

Keywords
Granger causality multivariate time series vector autoregressive process Wald test with constrained parameter spaces multiple hypothesis testing Lasso-penalized VAR approach

Citation

Hung, Ying-Chao; Tseng, Neng-Fang; Balakrishnan, Narayanaswamy. Trimmed Granger causality between two groups of time series. Electron. J. Statist. 8 (2014), no. 2, 1940--1972. doi:10.1214/14-EJS940. https://projecteuclid.org/euclid.ejs/1414588183


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