Robust regression with optimisation heuristics

Linear regression is widely-used in finance. While the standard method to obtain parameter estimates, Least Squares, has very appealing theoretical and numerical properties, obtained estimates are often unstable in the presence of extreme observations which are rather common in financial time series. One approach to deal with such extreme observations is the application of robust or resistant estimators, like Least Quantile of Squares estimators. Unfortunately, for many such alternative approaches, the estimation is much more difficult than in the Least Squares case, as the objective function is not convex and often has many local optima. We apply different heuristic methods like Differential Evolution, Particle Swarm and Threshold Accepting to obtain parameter estimates. Particular emphasis is put on the convergence properties of these techniques for fixed computational resources, and the techniques’ sensitivity for different parameter settings.Optimisation heuristics, Robust Regression, Least Median of Squares

Least Median of Squares Estimation by Optimization Heuristics with an Application to the CAPM and Multi Factor Models

For estimating the parameters of models for financial market data, the use of robust techniques is of particular interest. Conditional forecasts, based on the capital asset pricing model, and a factor model are considered. It is proposed to consider least median of squares estimators as one possible alternative to ordinary least squares. Given the complexity of the objective function for the least median of squares estimator, the estimates are obtained by means of optimization heuristics. The performance of two heuristics is compared, namely differential evolution and threshold accepting. It is shown that these methods are well suited to obtain least median of squares estimators for real world problems. Furthermore, it is analyzed to what extent parameter estimates and conditional forecasts differ between the two estimators. The empirical analysis considers daily and monthly data on some stocks from the Dow Jones Industrial Average Index (DJIA).LMS, CAPM, Multi Factor Model, Differential Evolution, Threshold Accepting

SOCP relaxation bounds for the optimal subset selection problem applied to robust linear regression

This paper deals with the problem of finding the globally optimal subset of h elements from a larger set of n elements in d space dimensions so as to minimize a quadratic criterion, with an special emphasis on applications to computing the Least Trimmed Squares Estimator (LTSE) for robust regression. The computation of the LTSE is a challenging subset selection problem involving a nonlinear program with continuous and binary variables, linked in a highly nonlinear fashion. The selection of a globally optimal subset using the branch and bound (BB) algorithm is limited to problems in very low dimension, tipically d<5, as the complexity of the problem increases exponentially with d. We introduce a bold pruning strategy in the BB algorithm that results in a significant reduction in computing time, at the price of a negligeable accuracy lost. The novelty of our algorithm is that the bounds at nodes of the BB tree come from pseudo-convexifications derived using a linearization technique with approximate bounds for the nonlinear terms. The approximate bounds are computed solving an auxiliary semidefinite optimization problem. We show through a computational study that our algorithm performs well in a wide set of the most difficult instances of the LTSE problem.Comment: 12 pages, 3 figures, 2 table

A robust M-estimate adaptive filter for impulse noise suppression

In this paper, a robust M-estimate adaptive filter for impulse noise suppression is proposed. The objective function used is based on a robust M-estimate. It has the ability to ignore or down weight large signal error when certain thresholds are exceeded. A systematic method for estimating such thresholds is also proposed. An advantage of the proposed method is that its solution is governed by a system of linear equations. Therefore, fast adaptation algorithms for traditional linear adaptive filters can be applied. In particular, a M-estimate recursive least square (M-RLS) adaptive algorithm is studied in detail. Simulation results show that it is more robust against individual and consecutive impulse noise than the MN-LMS and the N-RLS algorithms. It also has fast convergence speed and a low steady state error similar to its RLS counterpart.published_or_final_versio

A robust M-estimate adaptive equaliser for impulse noise suppression

In this paper, a FIR adaptive equaliser for impulse noise suppression is proposed. It is based on the minimization of an M-estimate objective function which has the ability to ignore or down-weight a large error signal when it exceeds certain thresholds. An advantage of the proposed method is that its solution is governed by a system of linear equations, called the M-estimate normal equation. Therefore, traditional fast algorithms like the recursive least squares algorithm can be applied. Using a robust estimation of the thresholds and the recursive least square algorithm, an M-estimate RLS (M-RLS) algorithm is developed. Simulation results show that the proposed algorithm has better convergence performance than the N-RLS and MN-LMS algorithms when the input signal of the equaliser is corrupted by individually or consecutive impulse noises. It also shares the low steady state error of the traditional RLS algorithm.published_or_final_versio

A Novel Rate Control Algorithm for Onboard Predictive Coding of Multispectral and Hyperspectral Images

Predictive coding is attractive for compression onboard of spacecrafts thanks to its low computational complexity, modest memory requirements and the ability to accurately control quality on a pixel-by-pixel basis. Traditionally, predictive compression focused on the lossless and near-lossless modes of operation where the maximum error can be bounded but the rate of the compressed image is variable. Rate control is considered a challenging problem for predictive encoders due to the dependencies between quantization and prediction in the feedback loop, and the lack of a signal representation that packs the signal's energy into few coefficients. In this paper, we show that it is possible to design a rate control scheme intended for onboard implementation. In particular, we propose a general framework to select quantizers in each spatial and spectral region of an image so as to achieve the desired target rate while minimizing distortion. The rate control algorithm allows to achieve lossy, near-lossless compression, and any in-between type of compression, e.g., lossy compression with a near-lossless constraint. While this framework is independent of the specific predictor used, in order to show its performance, in this paper we tailor it to the predictor adopted by the CCSDS-123 lossless compression standard, obtaining an extension that allows to perform lossless, near-lossless and lossy compression in a single package. We show that the rate controller has excellent performance in terms of accuracy in the output rate, rate-distortion characteristics and is extremely competitive with respect to state-of-the-art transform coding

Robust and large-scale quasiconvex programming in structure-from-motion

Structure-from-Motion (SfM) is a cornerstone of computer vision. Briefly speaking, SfM is the task of simultaneously estimating the poses of the cameras behind a set of images of a scene, and the 3D coordinates of the points in the scene. Often, the optimisation problems that underpin SfM do not have closed-form solutions, and finding solutions via numerical schemes is necessary. An objective function, which measures the discrepancy of a geometric object (e.g., camera poses, rotations, 3D coordi- nates) with a set of image measurements, is to be minimised. Each image measurement gives rise to an error function. For example, the reprojection error, which measures the distance between an observed image point and the projection of a 3D point onto the image, is a commonly used error function. An influential optimisation paradigm in SfM is the ℓ₀₀ paradigm, where the objective function takes the form of the maximum of all individual error functions (e.g. individual reprojection errors of scene points). The benefit of the ℓ₀₀ paradigm is that the objective function of many SfM optimisation problems become quasiconvex, hence there is a unique minimum in the objective function. The task of formulating and minimising quasiconvex objective functions is called quasiconvex programming. Although tremendous progress in SfM techniques under the ℓ₀₀ paradigm has been made, there are still unsatisfactorily solved problems, specifically, problems associated with large-scale input data and outliers in the data. This thesis describes novel techniques to tackle these problems. A major weakness of the ℓ₀₀ paradigm is its susceptibility to outliers. This thesis improves the robustness of ℓ₀₀ solutions against outliers by employing the least median of squares (LMS) criterion, which amounts to minimising the median error. In the context of triangulation, this thesis proposes a locally convergent robust algorithm underpinned by a novel quasiconvex plane sweep technique. Imposing the LMS criterion achieves significant outlier tolerance, and, at the same time, some properties of quasiconvexity greatly simplify the process of solving the LMS problem. Approximation is a commonly used technique to tackle large-scale input data. This thesis introduces the coreset technique to quasiconvex programming problems. The coreset technique aims find a representative subset of the input data, such that solving the same problem on the subset yields a solution that is within known bound of the optimal solution on the complete input set. In particular, this thesis develops a coreset approximate algorithm to handle large-scale triangulation tasks. Another technique to handle large-scale input data is to break the optimisation into multiple smaller sub-problems. Such a decomposition usually speeds up the overall optimisation process, and alleviates the limitation on memory. This thesis develops a large-scale optimisation algorithm for the known rotation problem (KRot). The proposed method decomposes the original quasiconvex programming problem with potentially hundreds of thousands of parameters into multiple sub-problems with only three parameters each. An efficient solver based on a novel minimum enclosing ball technique is proposed to solve the sub-problems.Thesis (Ph.D.) (Research by Publication) -- University of Adelaide, School of Computer Science, 201

Fitting multiplicative models by robust alternating regressions.

In this paper a robust approach for fitting multiplicative models is presented. Focus is on the factor analysis model, where we will estimate factor loadings and scores by a robust alternating regression algorithm. The approach is highly robust, and also works well when there are more variables than observations. The technique yields a robust biplot, depicting the interaction structure between individuals and variables. This biplot is not predetermined by outliers, which can be retrieved from the residual plot. Also provided is an accompanying robust R-2-plot to determine the appropriate number of factors. The approach is illustrated by real and artificial examples and compared with factor analysis based on robust covariance matrix estimators. The same estimation technique can fit models with both additive and multiplicative effects (FANOVA models) to two-way tables, thereby extending the median polish technique.Alternating regression; Approximation; Biplot; Covariance; Dispersion matrices; Effects; Estimator; Exploratory data analysis; Factor analysis; Factors; FANOVA; Least-squares; Matrix; Median polish; Model; Models; Outliers; Principal components; Robustness; Structure; Two-way table; Variables; Yield;

Estimating the geometric median in Hilbert spaces with stochastic gradient algorithms: LpL^{p} and almost sure rates of convergence

The geometric median, also called $L^{1}$-median, is often used in robust statistics. Moreover, it is more and more usual to deal with large samples taking values in high dimensional spaces. In this context, a fast recursive estimator has been introduced by Cardot, Cenac and Zitt. This work aims at studying more precisely the asymptotic behavior of the estimators of the geometric median based on such non linear stochastic gradient algorithms. The $L^{p}$ rates of convergence as well as almost sure rates of convergence of these estimators are derived in general separable Hilbert spaces. Moreover, the optimal rate of convergence in quadratic mean of the averaged algorithm is also given