Dynamic functional principal components

Siegfried Hörmann

doi:10.1111/rssb.12076

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Dynamic functional principal components

2014-07-18

140

Siegfried Hörmann *

Łukasz Kidziński

Marc Hallin

DOI：10.1111/rssb.12076

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Abstract

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We address the problem of dimension reduction for time series of functional data (Xt:tZ). Such functional time series frequently arise, for example, when a continuous time process is segmented into some smaller natural units, such as days. Then each X-t represents one intraday curve. We argue that functional principal component analysis, though a key technique in the field and a benchmark for any competitor, does not provide an adequate dimension reduction in a time series setting. Functional principal component analysis indeed is a static procedure which ignores the essential information that is provided by the serial dependence structure of the functional data under study. Therefore, inspired by Brillinger's theory of dynamic principal components, we propose a dynamic version of functional principal component analysis which is based on a frequency domain approach. By means of a simulation study and an empirical illustration, we show the considerable improvement that the dynamic approach entails when compared with the usual static procedure.

Keywords:

Dimension reduction

Frequency domain analysis

Functional data analysis

Functional spectral analysis

Functional time series

Karhunen-Loeve expansion

Principal components

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