A modified cross-entropy method for detecting change-points in the Sri-Lankan stock market

Madawa Priyadarshana, Georgy Yu Sofronov

Research output: Chapter in Book/Report/Conference proceedingConference proceeding contribution

4 Citations (Scopus)

Abstract

Change-points or break-points in a sequence of observations occur because of sudden changes in the underlying process. These changes can be due to internal or external factors, or both. It is a well observed fact that economic time series heavily depend on external factors such as market information, apart from the inherited internal variations. Thus, they are open to have abrupt changes naturally in the process. We propose a procedure "mCE-ARMA", which utilizes Autoregressive-moving-average (ARMA) time series modelling and a modified version of the Cross-Entropy method to identify the change-points in time series observations. A multi-core architecture based on parallel implementation of the propose method is also considered. We observe that the parallel implementation has significantly reduced computation cost in which the processes are highly time consuming. The methodology is assessed in terms of segmentation performance through artificially generated data and a well known real data set in the literature. Finally, we use the propose procedure to identify potential change-point locations in the All Share Price Index (ASPI) of Sri Lanka from 2001 to 2012. Our results suggest that the proposed mCE-ARMA method is an effective way of segmenting time series data as compared to the competing methodologies.

Original languageEnglish
Title of host publicationProceedings of the IASTED International Conference on Engineering and Applied Science, EAS 2012
EditorsB. M. Chen, M. T. Khan, K-K. Tan
Place of PublicationCalgary, Canada
PublisherACTA Press
Pages319-326
Number of pages8
ISBN (Print)9780889869523
DOIs
Publication statusPublished - 2012
EventIASTED International Conference on Engineering and Applied Science, EAS 2012 - Colombo, Sri Lanka
Duration: 27 Dec 201229 Dec 2012

Other

OtherIASTED International Conference on Engineering and Applied Science, EAS 2012
CountrySri Lanka
CityColombo
Period27/12/1229/12/12

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  • Cite this

    Priyadarshana, M., & Sofronov, G. Y. (2012). A modified cross-entropy method for detecting change-points in the Sri-Lankan stock market. In B. M. Chen, M. T. Khan, & K-K. Tan (Eds.), Proceedings of the IASTED International Conference on Engineering and Applied Science, EAS 2012 (pp. 319-326). Calgary, Canada: ACTA Press. https://doi.org/10.2316/P.2012.785-041