Why Hammerstein-Type Block Models Are So Efficient: Case Study of Financial Econometrics

Authors

Thongchai Dumrongpokaphan, Chiang Mai UniversityFollow
Afshin Gholamy, The University of Texas at El PasoFollow
Vladik Kreinovich, The University of Texas at El PasoFollow
Nguyen Hoang Phuong, Thang Long UniversityFollow

Publication Date

5-2018

Comments

Technical Report: UTEP-CS-18-45

Dumrongpokaphan T., Gholamy A., Kreinovich V., Nguyen H.P. (2019) Why Hammerstein-Type Block Models Are so Efficient: Case Study of Financial Econometrics. In: Kreinovich V., Thach N., Trung N., Van Thanh D. (eds) Beyond Traditional Probabilistic Methods in Economics. ECONVN 2019. Studies in Computational Intelligence, vol 809. Springer, Cham
https://doi.org/10.1007/978-3-030-04200-4_9

Abstract

In the first approximation, many economic phenomena can be described by linear systems. However, many economic processes are non-linear. So, to get a more accurate description of economic phenomena, it is necessary to take this non-linearity into account. In many economic problems, among many different ways to describe non-linear dynamics, the most efficient turned out to be Hammerstein-type block models, in which the transition from one moment of time to the next consists of several consequent blocks: linear dynamic blocks and blocks describing static non-linear transformations. In this paper, we explain why such models are so efficient in econometrics.