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December 2018 On the evolution of the United Kingdom price distributions
Ba Chu, Kim Huynh, David Jacho-Chávez, Oleksiy Kryvtsov
Ann. Appl. Stat. 12(4): 2618-2646 (December 2018). DOI: 10.1214/18-AOAS1172

Abstract

We propose a functional principal components method that accounts for stratified random sample weighting and time dependence in the observations to understand the evolution of distributions of monthly micro-level consumer prices for the United Kingdom (UK). We apply the method to publicly available monthly data on individual-good prices collected in retail stores by the UK Office for National Statistics for the construction of the UK Consumer Price Index from March 1996 to September 2015. In addition, we conduct Monte Carlo simulations to demonstrate the effectiveness of our methodology. Our method allows us to visualize the dynamics of the price distribution and uncovers interesting patterns during the sample period. Further, we demonstrate the efficacy of our methodology with an out-of-sample forecasting algorithm which exploits the time dependence of distributions. Our out-of-sample forecasts compares favorably with the random walk forecast.

Citation

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Ba Chu. Kim Huynh. David Jacho-Chávez. Oleksiy Kryvtsov. "On the evolution of the United Kingdom price distributions." Ann. Appl. Stat. 12 (4) 2618 - 2646, December 2018. https://doi.org/10.1214/18-AOAS1172

Information

Received: 1 July 2017; Revised: 1 April 2018; Published: December 2018
First available in Project Euclid: 13 November 2018

zbMATH: 07029468
MathSciNet: MR3875714
Digital Object Identifier: 10.1214/18-AOAS1172

Rights: Copyright © 2018 Institute of Mathematical Statistics

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Vol.12 • No. 4 • December 2018
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