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Monitoring processes with changing variances

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

International Journal of Forecasting, 2009, vol. 25, issue 3, 518-525

Abstract: Statistical process control (SPC) has evolved beyond its classical applications in manufacturing to monitoring economic and social phenomena. This extension has required the 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.

Keywords: Control; charts; GARCH; Heteroscedasticity; Innovations; State; space; Statistical; process; control (search for similar items in EconPapers)
Date: 2009
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Working Paper: Monitoring Processes with Changing Variances (2008) Downloads
Working Paper: Monitoring Processes with Changing Variances (2008) Downloads
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Handle: RePEc:eee:intfor:v:25:y:2009:i:3:p:518-525