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Usage of control charts for time series analysis in financial management

    Martin Kovářík Affiliation
    ; Libor Sarga Affiliation
    ; Petr Klímek Affiliation

Abstract

We will deal with corporate financial proceeding using statistical process control, specifically time series control charts. The article outlines intersection of two disciplines, namely econometrics and statistical process control. Theoretical part discusses methodology of time series control charts, and in research part, the methodology is demonstrated on two case studies. The first focuses on analysis of Slovak currency from the perspective of its usefulness for generating profits through time series control charts. The second involves regulation of financial flows for a heteroskedastic financial process by EWMA and ARIMA control charts. We use Box-Jenkins methodology to find models of time series of annual Argentinian Gross Domestic Product available as a basic index from 1951–1998. We demonstrate the versatility of control charts not only in manufacturing but also in managing financial stability of cash flows. Specifically, we show their sensitivity in detecting even small shifts in mean which may indicate financial instability. This analytical approach is widely applicable and therefore of theoretical and practical interest.

Keyword : statistical process control, Shewhart’s control charts, autocorrelation, control chart EWMA, control chart CUSUM, control chart ARIMA

How to Cite
Kovářík, M., Sarga, L., & Klímek, P. (2014). Usage of control charts for time series analysis in financial management. Journal of Business Economics and Management, 16(1), 138-158. https://doi.org/10.3846/16111699.2012.732106
Published in Issue
Dec 16, 2014
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This work is licensed under a Creative Commons Attribution 4.0 International License.