Granger causality of bivariate stationary curve time series

10/11/2020

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by   Han Lin Shang, et al.

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We study causality between bivariate curve time series using the Granger causality generalized measures of correlation. With this measure, we can investigate which curve time series Granger-causes the other; in turn, it helps determine the predictability of any two curve time series. Illustrated by a climatology example, we find that the sea surface temperature Granger-causes the sea-level atmospheric pressure. Motivated by a portfolio management application in finance, we single out those stocks that lead or lag behind Dow-Jones industrial averages. Given a close relationship between S P 500 index and crude oil price, we determine the leading and lagging variables.