Imputation of Missing Values in Economic and Financial Time Series Data Using Five Principal Component Analysis Approaches

Authors

Chisimkwuo John, Michael Okpara University of Agriculture, UmudikeFollow
Emmanuel J. Ekpenyong, Michael Okpara University of AgricultureFollow
Charles C. Nworu, Michael Okpara University of Agriculture, UmudikeFollow

Keywords

Financial time series, Imputation, Missing data, PCA

Abstract

This study assesses five approaches for imputing missing values. The evaluated methods include Singular Value Decomposition Imputation (svdPCA), Bayesian imputation (bPCA), Probabilistic imputation (pPCA), Non-Linear Iterative Partial Least squares imputation (nipalsPCA) and Local Least Square imputation (llsPCA). A 5%, 10%, 15% and 20% missing data were created under a missing completely at random (MCAR) assumption using five (5) variables: Net Foreign Assets (NFA), Credit to Core Private Sector (CCP), Reserve Money (RM), Narrow Money (M1), Private Sector Demand Deposits (PSDD), from 1981 to 2019 using R-software. The five imputation methods were used to estimate the artificially generated missing values. The performances of the PCA imputation approaches were evaluated based on the Mean Forecast Error (MFE), Root Mean Squared Error (RMSE) and Normalized Root Mean Squared Error (NRMSE) criteria. The result suggests that the bPCA, llsPCA and pPCA methods performed better than other imputation methods with the bPCA being the more appropriate method and llsPCA, the best method as it appears to be more stable than others in terms of the proportion of missingness.

Publication Title

CBN Journal of Applied Statistics

Issue

1

Volume

10

Recommended Citation

John, Chisimkwuo; Ekpenyong, Emmanuel J.; and Nworu, Charles C. (2019) "Imputation of Missing Values in Economic and Financial Time Series Data Using Five Principal Component Analysis Approaches," CBN Journal of Applied Statistics (JAS): Vol. 10: No. 1, Article 3.
Available at: https://dc.cbn.gov.ng/jas/vol10/iss1/3