• Title/Summary/Keyword: financial time series

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Corporate Default Prediction Model Using Deep Learning Time Series Algorithm, RNN and LSTM (딥러닝 시계열 알고리즘 적용한 기업부도예측모형 유용성 검증)

  • Cha, Sungjae;Kang, Jungseok
    • Journal of Intelligence and Information Systems
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    • v.24 no.4
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    • pp.1-32
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    • 2018
  • In addition to stakeholders including managers, employees, creditors, and investors of bankrupt companies, corporate defaults have a ripple effect on the local and national economy. Before the Asian financial crisis, the Korean government only analyzed SMEs and tried to improve the forecasting power of a default prediction model, rather than developing various corporate default models. As a result, even large corporations called 'chaebol enterprises' become bankrupt. Even after that, the analysis of past corporate defaults has been focused on specific variables, and when the government restructured immediately after the global financial crisis, they only focused on certain main variables such as 'debt ratio'. A multifaceted study of corporate default prediction models is essential to ensure diverse interests, to avoid situations like the 'Lehman Brothers Case' of the global financial crisis, to avoid total collapse in a single moment. The key variables used in corporate defaults vary over time. This is confirmed by Beaver (1967, 1968) and Altman's (1968) analysis that Deakins'(1972) study shows that the major factors affecting corporate failure have changed. In Grice's (2001) study, the importance of predictive variables was also found through Zmijewski's (1984) and Ohlson's (1980) models. However, the studies that have been carried out in the past use static models. Most of them do not consider the changes that occur in the course of time. Therefore, in order to construct consistent prediction models, it is necessary to compensate the time-dependent bias by means of a time series analysis algorithm reflecting dynamic change. Based on the global financial crisis, which has had a significant impact on Korea, this study is conducted using 10 years of annual corporate data from 2000 to 2009. Data are divided into training data, validation data, and test data respectively, and are divided into 7, 2, and 1 years respectively. In order to construct a consistent bankruptcy model in the flow of time change, we first train a time series deep learning algorithm model using the data before the financial crisis (2000~2006). The parameter tuning of the existing model and the deep learning time series algorithm is conducted with validation data including the financial crisis period (2007~2008). As a result, we construct a model that shows similar pattern to the results of the learning data and shows excellent prediction power. After that, each bankruptcy prediction model is restructured by integrating the learning data and validation data again (2000 ~ 2008), applying the optimal parameters as in the previous validation. Finally, each corporate default prediction model is evaluated and compared using test data (2009) based on the trained models over nine years. Then, the usefulness of the corporate default prediction model based on the deep learning time series algorithm is proved. In addition, by adding the Lasso regression analysis to the existing methods (multiple discriminant analysis, logit model) which select the variables, it is proved that the deep learning time series algorithm model based on the three bundles of variables is useful for robust corporate default prediction. The definition of bankruptcy used is the same as that of Lee (2015). Independent variables include financial information such as financial ratios used in previous studies. Multivariate discriminant analysis, logit model, and Lasso regression model are used to select the optimal variable group. The influence of the Multivariate discriminant analysis model proposed by Altman (1968), the Logit model proposed by Ohlson (1980), the non-time series machine learning algorithms, and the deep learning time series algorithms are compared. In the case of corporate data, there are limitations of 'nonlinear variables', 'multi-collinearity' of variables, and 'lack of data'. While the logit model is nonlinear, the Lasso regression model solves the multi-collinearity problem, and the deep learning time series algorithm using the variable data generation method complements the lack of data. Big Data Technology, a leading technology in the future, is moving from simple human analysis, to automated AI analysis, and finally towards future intertwined AI applications. Although the study of the corporate default prediction model using the time series algorithm is still in its early stages, deep learning algorithm is much faster than regression analysis at corporate default prediction modeling. Also, it is more effective on prediction power. Through the Fourth Industrial Revolution, the current government and other overseas governments are working hard to integrate the system in everyday life of their nation and society. Yet the field of deep learning time series research for the financial industry is still insufficient. This is an initial study on deep learning time series algorithm analysis of corporate defaults. Therefore it is hoped that it will be used as a comparative analysis data for non-specialists who start a study combining financial data and deep learning time series algorithm.

A Time Series Study on Management Efficiency of Public Institutions

  • Ji-Kyung Jang
    • Journal of the Korea Society of Computer and Information
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    • v.28 no.9
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    • pp.159-165
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    • 2023
  • This study aims to analyze the changes in the management efficiency of public institutions in time series, and to examine the relationship with financial performance based on the results of time series changes. Specifically, we classified into upper and lower groups of financial performance based on the government's management evaluation results, and analyze how the management efficiency of each group changed in the period before the evaluation year. Based on public institutions published in public business information system, DEA(Data Envelopment Analysis) was performed for estimating management efficiency. The results are summarized as follows; First, we find that DEA of the upper group changed in the direction of increasing, but DEA of the lower group changed in the direction of decreasing. Second, we find that there is a significant positive relation between DEA and financial performance. This result means that the higher financial performance, the higher management efficiency. These findings imply that management efficiency can be a factor that improve financial performance in public institutions. The results also suggest that government's innovation strategies to improve financial stability by enhancing management efficiency were effective.

FPCA for volatility from high-frequency time series via R-function (FPCA를 통한 고빈도 시계열 변동성 분석: R함수 소개와 응용)

  • Yoon, Jae Eun;Kim, Jong-Min;Hwang, Sun Young
    • The Korean Journal of Applied Statistics
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    • v.33 no.6
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    • pp.805-812
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    • 2020
  • High-frequency data are now prevalent in financial time series. As a functional data arising from high-frequency financial time series, we are concerned with the intraday volatility to which functional principal component analysis (FPCA) is applied in order to achieve a dimension reduction. A review on FPCA and R function is made and high-frequency KOSPI volatility is analysed as an application.

Multivariate volatility for high-frequency financial series (다변량 고빈도 금융시계열의 변동성 분석)

  • Lee, G.J.;Hwang, Sun Young
    • The Korean Journal of Applied Statistics
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    • v.30 no.1
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    • pp.169-180
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    • 2017
  • Multivariate GARCH models are interested in conditional variances (volatilities) as well as conditional correlations between return time series. This paper is concerned with high-frequency multivariate financial time series from which realized volatilities and realized conditional correlations of intra-day returns are calculated. Existing multivariate GARCH models are reviewed comparatively with the realized volatility via canonical correlations and value at risk (VaR). Korean stock prices are analysed for illustration.

A Multi-Resolution Approach to Non-Stationary Financial Time Series Using the Hilbert-Huang Transform

  • Oh, Hee-Seok;Suh, Jeong-Ho;Kim, Dong-Hoh
    • The Korean Journal of Applied Statistics
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    • v.22 no.3
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    • pp.499-513
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    • 2009
  • An economic signal in the real world usually reflects complex phenomena. One may have difficulty both extracting and interpreting information embedded in such a signal. A natural way to reduce complexity is to decompose the original signal into several simple components, and then analyze each component. Spectral analysis (Priestley, 1981) provides a tool to analyze such signals under the assumption that the time series is stationary. However when the signal is subject to non-stationary and nonlinear characteristics such as amplitude and frequency modulation along time scale, spectral analysis is not suitable. Huang et al. (1998b, 1999) proposed a data-adaptive decomposition method called empirical mode decomposition and then applied Hilbert spectral analysis to decomposed signals called intrinsic mode function. Huang et al. (1998b, 1999) named this two step procedure the Hilbert-Huang transform(HHT). Because of its robustness in the presence of nonlinearity and non-stationarity, HHT has been used in various fields. In this paper, we discuss the applications of the HHT and demonstrate its promising potential for non-stationary financial time series data provided through a Korean stock price index.

Long-run Equilibrium Relationship Between Financial Intermediation and Economic Growth: Empirical Evidence from Philippines

  • MONSURA, Melcah Pascua;VILLARUZ, Roselyn Mostoles
    • The Journal of Asian Finance, Economics and Business
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    • v.8 no.5
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    • pp.21-27
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    • 2021
  • The financial sector is one of the most important building blocks of the economy. When this sector efficiently implemented a well-crafted program on banking and financial system to translate financial activities to income-generating activity, economic growth will be realized. Hence, this study analyzed the effect of financial intermediation on economic growth and the existence of cointegrating relationship using time-series data from 1986 to 2015. The influence of financial intermediation in terms of bank credit to bank deposit ratio, private credit, and stock market capitalization and time trend to economic growth was estimated using ordinary least squares (OLS) multiple regression. The results showed that all the financial intermediation indicators and time trend exert significant effect on Gross Domestic Product (GDP) per capita. The positive sign of the time trend indicates that there is an upward trend in GDP per capita averaging approximately 0.06 percent annually. Furthermore, the cointegration test using the Johansen procedure revealed that there is a presence of long-term equilibrium relationship between financial intermediation and time trend and economic growth, and rules out spurious regression results. This study established the idea that financial intermediation in the Philippines has a significant and vital role in stimulating growth in the economy.

Impact of COVID-19 Pandemic on the Stock Prices Across Industries: Evidence from the UAE

  • ELLILI, Nejla Ould Daoud
    • The Journal of Asian Finance, Economics and Business
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    • v.8 no.11
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    • pp.11-19
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    • 2021
  • The aim of this paper is to evaluate the impact of the COVID-19 pandemic on the stock prices of the companies traded on the UAE financial markets (Abu Dhabi Securities Exchange and Dubai Financial Market). The time series regressions have been applied to estimate the impact of COVID-19 data on the companies' stock prices movements. The data cover the period between January 29th, 2020, and January 5th, 2021. The data was collected from the website of the Federal Competitiveness and Statistics Centre of the UAE. The empirical results of this study show that the stock prices are negatively and significantly affected by the number of COVID-19 positive cases and the number of death while they are positively and significantly affected by the number of recoveries. The results vary from one industry to another. These results would be important to the policymakers and financial regulators in developing the needed policies to improve the stock markets' resilience and maintain financial and economic stability. In addition, the findings would be useful to the investors and portfolio managers in taking the most appropriate investment decisions and managing more efficiently their portfolios. This paper will shed light on the responsiveness of the UAE financial market to the COVID-19 pandemic.

Evidence of Taylor Property in Absolute-Value-GARCH Processes for Korean Financial Time Series (Absolute-Value-GARCH 모형을 이용한 국내 금융시계열의 Taylor 성질에 대한 사례연구)

  • Baek, J.S.;Hwang, S.Y.;Choi, M.S.
    • The Korean Journal of Applied Statistics
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    • v.23 no.1
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    • pp.49-61
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    • 2010
  • The time series dependencies of Financial volatility are frequently measured by the autocorrelation function of power-transformed absolute returns. It is known as the Taylor property that the autocorrelations of the absolute returns are larger than those of the squared returns. Hass (2009) developed a simple method for detecting the Taylor property in absolute-value-GAROH(1,1) (AVGAROH(1,1)) model. In this article, we fitted AVGAROH(1,1) model for various Korean financial time series and observed the Taylor property.

Asymmetric CCC Modelling in Multivariate-GARCH with Illustrations of Multivariate Financial Data (금융시계열 분석을 위한 다변량-GARCH 모형에서 비대칭-CCC의 도입 및 응용)

  • Park, R.H.;Choi, M.S.;Hwan, S.Y.
    • The Korean Journal of Applied Statistics
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    • v.24 no.5
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    • pp.821-831
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    • 2011
  • It has been relatively incomplete in the field of financial time series to adapt asymmetric features to multivar ate GARCH processes (McAleer et al., 2009). Retaining constant conditional correlation(CCC) structure, this article pursues to introduce asymmetric GARCH modelling in analysing multivariate volatilities in time series in a practical point of view. Multivariate Korean financial time series are analyzed in detail to compar our theory with conventional methodologies including GARCH and EGARCH.

A Study on the Impact of the Financial Crises on Container Throughput of Busan Port (금융위기로 인한 부산항 컨테이너물동량 변화에 관한 연구)

  • Jeong, Suhyun;Shin, Chang-Hoon
    • Journal of Korea Port Economic Association
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    • v.32 no.2
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    • pp.25-37
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    • 2016
  • The economy of South Korea has experienced two financial crises: the 1997 Asian financial crisis and the 2008 global financial crisis. These crises had a significant impact on the nation's macro-economic indicators. Furthermore, they had a profound influence on container traffic in container ports in Busan, which is the largest port in South Korea in terms of TEUs handled. However, the impact of the Asian financial crisis on container throughput is not clear. In this study, we assume that the two financial crises are independent and different, and then analyze how each of them impacted container throughput in Busan ports. To perform this analysis, we use an intervention model that is a special type of ARIMA model with input series. Intervention models can be used to model and forecast a response series and to analyze the impact of an intervention or event on the series. This study focuses on the latter case, and our results show that the impacts of the financial crises vary considerably.