Minimum reversion in multivariate time series

Torsten Kleinow, Michel Vellekoop

Research output: Working paper

Abstract

We propose a new multivariate time series model in which we assume that each component has a tendency to revert to the minimum of all components. Such a specification is useful to describe phenomena where each member in a population which is subjected to random noise mimics the behaviour of the best performing member. We show that the proposed dynamics generate co-integrated processes.We characterize the model's asymptotic properties for the case of two populations and show a stabilizing effect on long term dynamics in simulation studies. An empirical study involving human survival data in different countries provides an example which confirms the occurrence of the phenomenon of reversion to the minimum in real data.
Original languageEnglish
PublisherarXiv
Publication statusPublished - 26 Nov 2018

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Keywords

  • stat.AP

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