See discussions, stats, and author profiles for this publication at: https://www.researchgate.

net/publication/330663408

Bayesian Analysis for Some Time Series Data Models

Thesis · December 2017

CITATIONS READS

0 86

1 author:

Praveen Kumar Tripathi

Banasthali University
11 PUBLICATIONS   14 CITATIONS   

SEE PROFILE

Some of the authors of this publication are also working on these related projects:

Classical and Bayesian prediction of TFR of India using ARIMA model View project

A time series approach to model and analyse the socio-economic data. View project

All content following this page was uploaded by Praveen Kumar Tripathi on 28 April 2021.

The user has requested enhancement of the downloaded file.

BAYESIAN ANALYSIS FOR SOME TIME SERIES
DATA MODELS

ABSTRACT
THESIS SUBMITTED FOR THE DEGREE OF
Doctor of Philosophy
in
Statistics

By
Praveen Kumar Tripathi
Supervisor

Prof. S. K. Upadhyay

DEPARTMENT OF STATISTICS
INSTITUTE OF SCIENCE
BANARAS HINDU UNIVERSITY
VARANASI- 221005
INDIA

Enrollment No. 361692 December, 2017

 Abstract

In our daily lives, we observe data in the form of occurrences of the phenomena over
a period of time, which considerably affect our activities in many circumstances. More
formally, such data over a period of time are known as time series data. Truly speaking,
the time series data form a sequence of observations taken at successive equally spaced
points in time representing a sequence of discrete set of observations. Practically, monthly
unemployment rate for the last five years of a country, quarterly or yearly index of growth
rate of a country or gross national product within a country can be considered as examples
of time series data. Time series data can be found in a variety of disciplines such as
economics, business, engineering, medical, social science, etc. Macroeconomic data are
the most common form of time series data in economics and measure phenomena such
as the real gross domestic product (GDP), interest rates, inflation, real exchange rates
and the money supply, etc. Naturally, time series data may be continuous or discrete
depending on the way of obtaining the observations on continuous or discrete scale,
respectively. This thesis primarily considers discrete time series data taken from at least
two important disciplines although similar data arising from other disciplines can be
likewise considered and analyzed.
Modelling of time series data is crucial for the purpose of developing appropriate anal-
ysis and to draw the relevant conclusions from the same. As the ultimate objective of
time series analyses is the forecasting of unseen and unobserved future occurrences of the
data, a number of models are entertained depending on the nature and demand of the
data. Some such models include multiple regression, Box–Jenkins, seasonal, autoregres-
sive and stochastic volatility models, etc. Moreover, each such analysis may be related
to either univariate scenario involving modelling of one time series data or multivariate

2
scenario involving several series together. Moreover, the analysis can be carried out either
using the tools of classical paradigm or using the tools of Bayesian paradigm. The present
thesis is, undoubtedly, concerned with the Bayes analyses of univariate time series data
models although some classical estimates are also used to support our analyses.
Among various other disciplines, time series models are widely explored in economet-
rics where these models provide a hypothetically constructed framework that is designed
to illustrate the complicated processes in a simple way by using some mathematical
and/or other similar techniques. Such framework and procedures are not only limited to
the econometrics but equally well applicable in other fields of interest like demography,
seismology, meteorology, geophysics and communication engineering, etc. under prevail-
ing circumstances. Depending on the nature of time series, a number of classical as well
as Bayesian studies can be seen in the literatures which include Box and Jenkins (1976),
Monahan (1983), Chib and Greenberg (1994), Marriott et al. (1996) and Tripathi et al.
(2017), etc.
In time series analysis, the variability is often considered as constant. This consid-
eration leads to a variety of usual models such as multiple regression and autoregressive
models, etc. The situation, however, arises where variability is governed through time
rather being a constant in nature. To analyze such phenomenon, the stochastic volatility
models are used. In spite of its several difficulties like latent feature of volatility and the
two innovations used by the model for each observation, volatility models offer better
forecast of assets than any other competing models, especially in econometrics and finan-
cial time series. References to this context include Jacquier et al. (1994)), Chib et al.
(2002), Jacquier et al. (2004), etc.
The present thesis is mainly focussed on applied aspects of various Bayesian method-
ologies especially related to time series data in Indian context. The analyses of time
series data in our own context have resulted in an enormous amount of work mostly
using the tools of classical paradigm. Our developments in the Bayesian context, on the
other hand, are comparatively meager although it can be acclaimed that the world wide
developments in time series analyses is largely due to Bayesian paradigm. Moreover, it

3
can be rightly pointed out that the time series data in Indian context have lots of their
own peculiarities in the sense that they are not only affected by their own characteristics
but also affected by global impacts. Besides these, the Indian socio-economic data (say,
for example, demographic data) possess their own peculiarities and often show unstable
patterns in their (say) demographic indicators with reference to a stationary population.
This is perhaps the reason that it is quite difficult though not impossible to forecast ex-
actly the socio-economic characteristics such as, exchange rate, growth rate, the inflation,
fertility rate, etc. The thesis is expected to proceed on the same very objective through
easy to implement Bayesian procedures.
The total work in the thesis is divided into five chapters. The Chapter 1 is introductory
and attempts to provide the necessary background material for the development of rest
of the thesis although it is often realized that however hard one tries, it can never be
exhaustive in the finite resources of available schedule. The chapter also provides a brief
review of relevant literature and briefly summarizes the proposed plan of the thesis given
in a separate section. The discussion is throughout focussed but supplemented everywhere
with an updated list of references for completeness in some sense.
Chapter 2 provides an approximate Bayes analysis of ARMA model using vague priors
for the parameters. The approximation is based on the use of conditional likelihood
arising from ARMA model after replacing the unknown values by zeros. A sample based
approach, in particular, the Gibbs sampler, is used to find out the posterior inferences
for the models under consideration. We have used vague priors in order that the final
inferences remain data dependent and simultaneously the Bayesian logic is also justified.
For numerical illustration, Indian GDP data are used after assuring the stationarity of
the data by differencing them once. Similarly, the data are also checked for invertibility
before going for their actual analysis. The results provide the complete posterior analysis
of the entertained models for certain small choices of autoregressive and moving average
components. The chapter also provides model comparison based on posterior predictive
loss criterion to recommend for the most appropriate model from the considered ones.
The retrospective short term predictions of the data are provided based on the final

4
recommended model. In general, the results are found to be satisfactory.
Chapter 3 is an extension of Chapter 2 in the sense that it provides a simple Bayes
analysis of ARMA model and its components based on another approximation of like-
lihood and weak priors for the parameters, latter employed with stationarity and in-
vertibility restrictions. A Gibbs-Metropolis hybridization scheme is used to draw the
corresponding posterior based inferences for the models under consideration. The com-
patibility of the models with the data is examined using Ljung-Box-Pierce statistic based
on chi-square. The chapter also compares different models that are found compatible
through posterior predictive loss criterion to recommend for the most appropriate model.
For numerical illustration, Indian GDP growth rate data at constant prices, introduced
in Chapter 1, are considered after ensuring the stationarity of the data by differencing
it once. The retrospective short term predictions of the data are provided based on
the final recommended model. It is expected that the considered methodology offers an
easy and precise method for economic data analysis. Besides, it has also been observed
that the considered approximation provides slight improvement over the approximation
entertained in the previous chapter.
Chapter 4 is slightly different from previous chapters in the sense that it considers
time series data on demographic aspect. The chapter illustrates a simple methodology
to predict total fertility rate of India through an approximate Bayes analysis using a
particular case of general ARIMA model. The corresponding results based on classical
paradigm are also obtained, especially using maximum likelihood estimators. The study
first examines the data for its stationarity and the same is achieved by differencing the
data twice. Once the stationarity is achieved, some specific cases of general ARIMA model
are examined for the given time series data to find the most appropriate candidate. This
is being done using Akaike’s information criterion and Bayes information criterion. The
selected specific case of the model is finally analyzed using both Bayesian and classical
tools, the former using vague priors for the parameters. The posterior computation in
Bayesian paradigm is done using MCMC simulation. The two paradigms ultimately focus
on drawing relevant inferences including the short term predictions, both retrospectively

5
and prospectively. The results are, in general, found to be satisfactory.
The last chapter proposes an extension of the autoregressive model with stochastic
volatility error. The Bayes analysis of the proposed model using vague priors for the pa-
rameters of the conditional mean equation and informative priors for the parameters of
conditional volatility equation is done. The Gibbs sampler with intermediate Metropolis
steps is used to find out posterior inferences for the parameters of autoregressive model
and independent Metropolis-Hastings algorithm is used to simulate the volatility of the
mean equation. The two data sets in the form of GDP growth rate of India at constant
prices and exchange rate of Indian rupees relative to US dollars are considered for nu-
merical illustration. These data are used after ensuring the stationarity by differencing
the data once. The retrospective short term predictions of the data are provided based
on the two simple components of the general autoregressive process. The findings based
on the real data are expected to assist the policy makers and managers to make economic
and business strategies more precisely.
The thesis ends with an updated list of references relevant to various sections/chapters.
Every attempt has been made to provide an exhaustive list of references although unin-
tentional negligence of a few important ones can never be denied. At last, it is important
to remark that the work on the present thesis is only a beginning with reference to the
analysis of time series data in Indian context; review of literature clearly provides an
impression that enough work is required by future researchers.

6
 References

Box, G. E. P. and Jenkins, G. M. (1976). Time Series Analysis: Forecasting and Control,
Revised ed. Holden-Day.

Chib, S. and Greenberg, E. (1994). Bayes inference in regression models with ARMA(p,
q) errors. Journal of Econometrics, 64(1):183–206.

Chib, S., Nardari, F., and Shephard, N. (2002). Markov chain Monte Carlo methods for
stochastic volatility models. Journal of Econometrics, 108(2):281–316.

Jacquier, E., Polson, N. G., and Rossi, P. E. (1994). Bayesian analysis of stochastic
volatility models. Journal of Business & Economic Statistics, 12(4):371–389.

Jacquier, E., Polson, N. G., and Rossi, P. E. (2004). Bayesian analysis of stochastic volatil-
ity models with fat-tails and correlated errors. Journal of Econometrics, 122(1):185–
212.

Marriott, J., Ravishanker, N., Gelfand, A., and Pai, J. (1996). Bayesian analysis of ARMA
processes: Complete sampling-based inference under exact likelihoods. Bayesian Anal-
ysis in Statistics and Eonometrics, pages 243–256.

Monahan, J. F. (1983). Fully Bayesian analysis of ARMA time series models. Journal of
Econometrics, 21(3):307–331.

Tripathi, P. K., Ranjan, R., Pant, R., and Upadhyay, S. K. (2017). An approximate Bayes
analysis of ARMA model for Indian GDP growth rate data. Journal of Statistics and
Management Systems, 20(3):399–419.

View publication stats