3 research outputs found
Too big to fail? An analysis of the Colombian banking system through compositional data
Although still incipient in economics and finance, compositional data analysis (in which relative information is more important than absolute values) has become more relevant in statistical analysis in recent years. This article constructs a concentration index for financial/banking systems by means of compositional analysis, to establish the potential existence of too big to fail financial entities. The intention is to provide an early warning tool for regulators about this kind of institutions. The index has been applied to the Colombian banking system and assessed over time with a forecast to determine whether the system is becoming more concentrated or not. It was found that the concentration index has been decreasing in recent years and the model predicts that this trend will continue. In terms of the methodology used, compositional models were shown to be more stable and to lead to better prediction of the index than the classical multivariate methodologies
Sequential Change-point Detection for Compositional Time Series with Exogenous Variables
Sequential change-point detection for time series enables us to sequentially
check the hypothesis that the model still holds as more and more data are
observed. It is widely used in data monitoring in practice. In this work, we
consider sequential change-point detection for compositional time series, time
series in which the observations are proportions. For fitting compositional
time series, we propose a generalized Beta AR(1) model, which can incorporate
exogenous variables upon which the time series observations are dependent. We
show the compositional time series are strictly stationary and geometrically
ergodic and consider maximum likelihood estimation for model parameters. We
show the partial MLEs are consistent and asymptotically normal and propose a
parametric sequential change-point detection method for the compositional time
series model. The change-point detection method is illustrated using a time
series of Covid-19 positivity rates