Detrending moving-average cross-correlation coefficient: Measuring cross-correlations between non-stationary series

Ladislav Krištoufek (lk@fsv.cuni.cz)

Papers from arXiv.org

Abstract: In the paper, we introduce a new measure of correlation between possibly non-stationary series. As the measure is based on the detrending moving-average cross-correlation analysis (DMCA), we label it as the DMCA coefficient $\rho_{DMCA}(\lambda)$ with a moving average window length $\lambda$. We analytically show that the coefficient ranges between -1 and 1 as a standard correlation does. In the simulation study, we show that the values of $\rho_{DMCA}(\lambda)$ very well correspond to the true correlation between the analyzed series regardless the (non-)stationarity level. Dependence of the newly proposed measure on other parameters -- correlation level, moving average window length and time series length -- is discussed as well.

Date: 2013-11
New Economics Papers: this item is included in nep-ecm and nep-ets
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Journal Article: Detrending moving-average cross-correlation coefficient: Measuring cross-correlations between non-stationary series (2014)
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Persistent link: https://EconPapers.repec.org/RePEc:arx:papers:1311.0657

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