Granger Causality Detection via Sequential Hypothesis Testing

Abstract

Most of the metrics used for detecting a causal relationship among multiple time series ignore the effects of practical measurement impairments, such as finite sample effects, undersampling and measurement noise. It has been shown that these effects significantly impair the performance of the underlying causality test. In this paper, we consider the problem of sequentially detecting the causal relationship between two time series while accounting for these measurement impairments. In this context, we first formulate the problem of Granger causality detection as a binary hypothesis test using the norm of the estimates of the vector auto-regressive~(VAR) coefficients of the two time series as the test statistic. Following this, we investigate sequential estimation of these coefficients and formulate a sequential test for detecting the causal relationship between two time series. Finally via detailed simulations, we validate our derived results, and evaluate the performance of the proposed causality detectors.Comment: 5 pages 3 figure