The behaviour of many financial time series cannot be modeled solely by linear time series model. Phenomena such as mean reversion, volatility of stock markets and structural breaks cannot be modelled implicitly using simple linear time series model. Thus, to overcome this problem, nonlinear time series models are typically designed to accommodate these nonlinear features in the data. In this paper, we use portmanteau test and structural change test to detect nonlinear feature in three ASEAN countries exchange rates (Malaysia, Singapore and Thailand). It is found that the null hypothesis of linearity is rejected and there is evidence of structural breaks in the exchange rates series. Therefore, the decision of using regime switching model in this study is justified. Using model selection criteria (AIC, SBC, HQC), we compare the in-sample fitting between two types of regime switching model. The two regime switching models we considered were the Self-Exciting Threshold Autoregressive (SETAR) model and the Markov switching Autoregressive (MS-AR) model where these models can explain the abrupt changes in a time series but differ as how they model the movement between regimes. From the AIC, SBC and HQC values, it is found that the MS -AR model is the best fitted model for all the return series. In addition, the regime switching model also found to perform better than simple autoregressive model in in-sample fitting. This result justified that nonlinear model give better in-sample fitting than linear model.
Over the years, maximum likelihood estimation and Bayesian method became popular statistical tools in which applied to fit finite mixture model. These trends begin with the advent of computer technology during the last decades. Moreover, the asymptotic properties for both statistical methods also act as one of the main reasons that boost the popularity of the methods. The difference between these two approaches is that the parameters for maximum likelihood estimation are fixed, but unknown meanwhile the parameters for Bayesian method act as random variables with known prior distributions. In the present paper, both the maximum likelihood estimation and Bayesian method are applied to investigate the relationship between exchange rate and the rubber price for Malaysia, Thailand, Philippines and Indonesia. In order to identify the most plausible method between Bayesian method and maximum likelihood estimation of time series data, Akaike Information Criterion and Bayesian Information Criterion are adopted in this paper. The result depicts that the Bayesian method performs better than maximum likelihood estimation on financial data.
There are many variables involved in the real life problem so it is difficult to choose an efficient model out of all possible models relating to analytical factors. Interaction terms affecting the model also need to be addressed because of its vital role in the actual dataset. The current study focused on efficient model selection for collector efficiency of solar dryer. For this purpose, collector efficiency of solar dryer was used as a dependent variable with time, inlet temperature, collector average temperature and solar radiation as independent variables. Hybrid of the least absolute shrinkage and selection operator (LASSO) and robust regression were proposed for the identification of efficient model selection. The comparison was made with the ordinary least square (OLS) after performing a multicollinearity and coefficient test and with a ridge regression analysis. The final selected model was obtained using eight selection criteria (8SC). To forecast the efficient model, the mean absolute percentage error (MAPE) was used. As compared to other methods, the proposed method provides a more efficient model with minimum MAPE.
Solar drier is considered to be an important product used in the internet of things (IoT). It is used to dry different kinds of products used in agriculture or aquaculture. There are many factors that have different effects on the drying of items in the solar drier. The current study focused on the removal of the moisture ratio in the drying process for seaweed using solar drier. For this purpose, a dataset containing 1924 observations was used to study the effect of six different independent variables on the dependent variable. Moisture ratio removal (%) was considered to be dependent variable with ambient temperature, chamber temperature, collector temperature, chamber relative humidity, ambient relative humidity and solar radiation as independent variables. All possible models were used in the analysis till fifth order interaction terms. Hybrid model of LASSO with bisquare M was proposed for efficient selection of the model. The procedure based on four phases was used for efficient model selection and a comparison was made with other existing sparse and robust regression techniques. The result indicates that the proposed technique is better than other existing techniques in terms of mean squared error (MSE) and mean absolute percentage error (MAPE).