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A New Correlation Coefficient for Bivariate Time-Series Data

Orhan Erdem (), Elvan Ceyhan and Yusuf Varlı
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Elvan Ceyhan: Koc University

No 201101, Working Papers from Murat Sertel Center for Advanced Economic Studies, Istanbul Bilgi University

Abstract: Correlation in time series has recently recieved a lot of attentions. Its usage has been getting an important role in Social Science and Finance. For example, pair trading in Finance is interested with the correlation between stock prices, returns etc. In general, Pearsonís correlation coefficient is seen in the area, although it has many assumptions which restrict its usage. In here, we introduce a new correlation coe¢ cient which takes account the lag difference of data points as a moment. It is more convenient to show the the direction of the movements of the two variables over time. We also simulate the main differences between Pearson's and our correlation coe¢ cients in some cases.

Keywords: Asymptotic normality; consistency; cross-correlation; Pearsons correlation coe¢ cient; stock returns; stationarity. (search for similar items in EconPapers)
JEL-codes: C1 C2 G12 (search for similar items in EconPapers)
Pages: 13 pages
Date: 2011-04
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http://repeck.bilgi.org.tr/RePEc/msc/wpaper/mscent ... Time-Series_Data.pdf First version, 2011 (application/pdf)

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Journal Article: A new correlation coefficient for bivariate time-series data (2014) Downloads
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