Monitoring Processes with Changing Variances

J. Keith Ord, Rob J Hyndman (), Anne B. Koehler and Ralph David Snyder ()

No 4/08, Monash Econometrics and Business Statistics Working Papers from Monash University, Department of Econometrics and Business Statistics

Abstract: Statistical process control (SPC) has evolved beyond its classical applications in manufacturing to monitoring economic and social phenomena. This extension requires consideration of autocorrelated and possibly non-stationary time series. Less attention has been paid to the possibility that the variance of the process may also change over time. In this paper we use the innovations state space modeling framework to develop conditionally heteroscedastic models. We provide examples to show that the incorrect use of homoscedastic models may lead to erroneous decisions about the nature of the process. The framework is extended to include counts data, when we also introduce a new type of chart, the P-value chart, to accommodate the changes in distributional form from one period to the next.

Keywords: Control charts; count data; GARCH; heteroscedasticity; innovations; state space; statistical process control (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ecm
Date: Written 2008
View list of references

Downloads: (external link)
http://www.buseco.monash.edu.au/depts/ebs/pubs/wpapers/2008/wp4-08.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Ordering information: This working paper can be ordered from
http://www.buseco.mo ... ts/ebs/pubs/wpapers/

Access Statistics for this paper

More papers in Monash Econometrics and Business Statistics Working Papers from Monash University, Department of Econometrics and Business Statistics
Address: PO Box 11E, Monash University, Victoria 3800, Australia
Contact information at EDIRC.
Series data maintained by Simone Grose ().