wavemulcor (version 3.1.2)

wave.multiple.cross.correlation: Wavelet routine for multiple cross-correlation

Description

Produces an estimate of the multiscale multiple cross-correlation (as defined below).

Usage

wave.multiple.cross.correlation(xx, lag.max=NULL, p=.975, ymaxr=NULL)

Arguments

xx

A list of \(n\) (multiscaled) time series, usually the outcomes of dwt or modwt, i.e. xx <- list(v1.modwt.bw, v2.modwt.bw, v3.modwt.bw)

lag.max

maximum lag (and lead). If not set, it defaults to half the square root of the length of the original series.

p

one minus the two-sided p-value for the confidence interval, i.e. the cdf value.

ymaxr

index number of the variable whose correlation is calculated against a linear combination of the rest, otherwise at each wavelet level wmc chooses the one maximizing the multiple correlation.

Value

List of two elements:

• xy.mulcor: numeric matrix with as many rows as levels in the wavelet transform object. The columns provide the point estimates for the wavelet multiple cross-correlations at different lags (and leads). The central column (lag=0) replicates the wavelet multiple correlations. Columns to the right (lag>0) give wavelet multiple cross-correlations with positive lag, i.e. with y=var[Pimax] lagging behind a linear combination of the rest: x[t]hat --> y[t+j]. Columns to the left (lag<0) give wavelet multiple cross-correlations with negative lag, i.e. with y=var[Pimax] leading a linear combination of the rest: y[t-j] --> x[t]hat.

• ci.mulcor: list of two elements:

  • lower: numeric matrix of the same dimensions as xy.mulcor giving the lower bounds of the corresponding \(100(1-2(1-p))\%\) confidence interval.

  • upper: idem for the upper bounds.

• YmaxR: numeric vector giving, at each wavelet level, the index number of the variable whose correlation is calculated against a linear combination of the rest. By default, wmcc chooses at each wavelet level the variable maximizing the multiple correlation.

Details

The routine calculates one single set of wavelet multiple cross-correlations out of \(n\) variables that can be plotted as one single set of graphs (one per wavelet level), as an alternative to trying to make sense out of \(n(n-1)/2 . J\) sets of wavelet cross-correlations. The code is based on the calculation, at each wavelet scale, of the square root of the coefficient of determination in a linear combination of variables that includes a lagged variable for which such coefficient of determination is a maximum.

References

Fern<U+00E1>ndez-Macho, J., 2012. Wavelet multiple correlation and cross-correlation: A multiscale analysis of Eurozone stock markets. Physica A: Statistical Mechanics and its Applications 391, 1097--1104. <DOI:10.1016/j.physa.2011.11.002>

Examples

# NOT RUN {
## Based on data from Figure 7.9 in Gencay, Selcuk and Whitcher (2001)
## plus one random series.

library(wavemulcor)
data(exchange)
returns <- diff(log(exchange))
returns <- ts(returns, start=1970, freq=12)
N <- dim(returns)[1]

wf <- "d4"
J <- trunc(log2(N))-3
lmax <- 36
n <- dim(returns)[1]

demusd.modwt <- brick.wall(modwt(returns[,"DEM.USD"], wf, J), wf)
jpyusd.modwt <- brick.wall(modwt(returns[,"JPY.USD"], wf, J), wf)
rand.modwt   <- brick.wall(modwt(rnorm(length(returns[,"DEM.USD"])), wf, J), wf)

##xx <- list(demusd.modwt.bw, jpyusd.modwt.bw)
xx <- list(demusd.modwt, jpyusd.modwt, rand.modwt)

Lst <- wave.multiple.cross.correlation(xx, lmax)
returns.cross.cor <- Lst$xy.mulcor[1:J,]
returns.lower.ci <- Lst$ci.mulcor$lower[1:J,]
returns.upper.ci <- Lst$ci.mulcor$upper[1:J,]
YmaxR <- Lst$YmaxR

# ---------------------------

##Producing correlation plot

rownames(returns.cross.cor) <- rownames(returns.cross.cor, do.NULL = FALSE, prefix = "Level ")
par(mfrow=c(3,2), las=1, pty="m", mar=c(2,3,1,0)+.1, oma=c(1.2,1.2,0,0))
ymin <- -0.1
if (length(xx)<3) ymin <- -1
for(i in J:1) {
  matplot((1:(2*lmax+1)),returns.cross.cor[i,], type="l", lty=1, ylim=c(ymin,1), xaxt="n",
          xlab="", ylab="", main=rownames(returns.cross.cor)[[i]][1])
  if(i<3) {axis(side=1, at=seq(1, 2*lmax+1, by=12), labels=seq(-lmax, lmax, by=12))}
  #axis(side=2, at=c(-.2, 0, .5, 1))
  abline(h=0,v=lmax+1)              ##Add Straight horiz and vert Lines to a Plot
  lines(returns.lower.ci[i,], lty=1, col=2) ##Add Connected Line Segments to a Plot
  lines(returns.upper.ci[i,], lty=1, col=2)
  text(1,1, labels=names(xx)[YmaxR[i]], adj=0.25, cex=.8)
}
par(las=0)
mtext('Lag (months)', side=1, outer=TRUE, adj=0.5)
mtext('Wavelet Multiple Cross-Correlation', side=2, outer=TRUE, adj=0.5)

# }