Abstract
We will deal with financial proceedings of the company using methods of SPC (Statistical Process Control), specifically through time series control charts. The paper will outline the intersection of two disciplines which are econometrics and statistical process control. The theoretical part will discuss the methodology of time series control charts and in the research part there will be this methodology demonstrated in three case studies. The first study will focus on the regulation of simulated financial flows for a company by CUSUM control chart. The second study will involve the regulation of financial flows for a heteroskedastic financial process by EWMA control chart. The last case study of our paper will be devoted to applications of ARIMA, EWMA and CUSUM control charts in the financial data that are sensitive to the mean shifting while calculating the autocorrelation in the data. In this paper, we highlight the versatility of control charts not only in manufacturing but also in managing the financial stability of cash flows.
Highlights
Traditional SPC schemes can be applied to monitoring the residuals
The end of this paper will be dedicated to the ARIMA, EWMA and CUSUM control charts together with some practical example of autocorrelated data
5.3 Case Study No 3 – A Use of Control Charts ARIMA CUSUM and EWMA We find a suitable model for the time series of annual gross domestic product of the United Kingdom which is available in the form of base indices from 1960 to 1997 (1995 = 100)
Summary
Traditional SPC schemes can be applied to monitoring the residuals Subsequent work on this problem can be broadly classified into two themes; those based on time series models and those which are model-free. For the former, three general approaches have been proposed: those which monitor residuals, those based on direct observations, and those based on new statistics. The most popular model-free approach is to form a multivariate statistic from the autocorrelated univariate process, and monitor it with the corresponding multivariate control chart. We will introduce regulation of simulated financial flows for a company by CUSUM control chart (see Case Study No 1). The end of this paper will be dedicated to the ARIMA, EWMA and CUSUM control charts together with some practical example of autocorrelated data (see Case Study No 3)
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