Financial time series are generally high-dimensional, non-stationary and exhibit heteroscedasticity. To derive a suitable way to cluster financial time series, these characteristics have to be taken into consideration. With this… Click to show full abstract
Financial time series are generally high-dimensional, non-stationary and exhibit heteroscedasticity. To derive a suitable way to cluster financial time series, these characteristics have to be taken into consideration. With this aim, the financial time series is firstly modeled using Generalized Autoregressive Conditional Heteroscedasticity (GARCH) models, where the parameters of GARCH models can represent the dynamic feature of the volatility in each time series. Therefore, the following clustering is realized based on the GARCH model parameters, which can help reduce the dimensionality of the original time series at the same time. Then, to produce semantically sound clustering results, we granulate the parameters based on the Axiomatic Fuzzy Set (AFS) theory and structure them into a collection of meaningful and semantically sound entities, i.e. AFS information granules. Furthermore, the hierarchical structure of AFS information granules is built to realize time series clustering under the framework of granular computing. In the proposed approach, the characteristics of financial time series is fully considered to proceed dimensionality reduction, and the semantic clustering results obtained for different numbers of clusters are guaranteed to be the most informative. In the experiments, an application for clustering the time series coming from Chinese Yuan (CNY) exchange rates against international currencies is presented to demonstrate the performance of the proposed clustering method. The results of clustering of the proposed method are the same as those of the Fuzzy C-Means algorithm and the hierarchical clustering with ward linkage, where the clustering results produced by the AFS hierarchical clustering exhibit well-articulated semantics at each level of the hierarchy.
               
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