--- title: "Getting Started with NNS: Partial Moments" author: "Fred Viole" output: rmarkdown::html_vignette vignette: > %\VignetteIndexEntry{Getting Started with NNS: Partial Moments} %\VignetteEngine{knitr::rmarkdown} \usepackage[utf8]{inputenc} --- ```{r setup, include=FALSE, message = FALSE} knitr::opts_chunk$set(echo = TRUE) library(NNS) library(data.table) data.table::setDTthreads(2L) options(mc.cores = 1) Sys.setenv("OMP_THREAD_LIMIT" = 2) ``` # Partial Moments Why is it necessary to parse the variance with partial moments? The additional information generated from partial moments permits a level of analysis simply not possible with traditional summary statistics. Below are some basic equivalences demonstrating partial moments role as the elements of variance. ## Mean ```{r mean, message=FALSE} library(NNS) set.seed(123) ; x = rnorm(100) ; y = rnorm(100) mean(x) UPM(1, 0, x) - LPM(1, 0, x) ``` ## Variance ```{r variance} # Sample Variance (base R): var(x) # Sample Variance: (UPM(2, mean(x), x) + LPM(2, mean(x), x)) * (length(x) / (length(x) - 1)) # Population Adjustment of Sample Variance (base R): var(x) * ((length(x) - 1) / length(x)) # Population Variance: UPM(2, mean(x), x) + LPM(2, mean(x), x) # Variance is also the co-variance of itself: (Co.LPM(1, x, x, mean(x), mean(x)) + Co.UPM(1, x, x, mean(x), mean(x)) - D.LPM(1, 1, x, x, mean(x), mean(x)) - D.UPM(1, 1, x, x, mean(x), mean(x))) ``` ## Standard Deviation ```{r stdev} sd(x) ((UPM(2, mean(x), x) + LPM(2, mean(x), x)) * (length(x) / (length(x) - 1))) ^ .5 ``` ## First 4 Moments The first 4 moments are returned with the function `NNS.moments`. For sample statistics, set `population = FALSE`. ```{r moments} NNS.moments(x) NNS.moments(x, population = FALSE) ``` ## Statistical Mode of a Continuous Distribution `NNS.mode` offers support for discrete valued distributions as well as recognizing multiple modes. ```{r mode} # Continuous NNS.mode(x) # Discrete and multiple modes NNS.mode(c(1, 2, 2, 3, 3, 4, 4, 5), discrete = TRUE, multi = TRUE) ``` ## Covariance ```{r covariance} cov(x, y) (Co.LPM(1, x, y, mean(x), mean(y)) + Co.UPM(1, x, y, mean(x), mean(y)) - D.LPM(1, 1, x, y, mean(x), mean(y)) - D.UPM(1, 1, x, y, mean(x), mean(y))) * (length(x) / (length(x) - 1)) ``` ## Covariance Elements and Covariance Matrix The covariance matrix $(\Sigma)$ is equal to the sum of the co-partial moments matrices less the divergent partial moments matrices. $$ \Sigma = CLPM + CUPM - DLPM - DUPM $$ ```{r cov_dec, warning=FALSE} cov.mtx = PM.matrix(LPM_degree = 1, UPM_degree = 1,target = 'mean', variable = cbind(x, y), pop_adj = TRUE) cov.mtx # Reassembled Covariance Matrix cov.mtx$clpm + cov.mtx$cupm - cov.mtx$dlpm - cov.mtx$dupm # Standard Covariance Matrix cov(cbind(x, y)) ``` ## Pearson Correlation ```{r pearson} cor(x, y) cov.xy = (Co.LPM(1, x, y, mean(x), mean(y)) + Co.UPM(1, x, y, mean(x), mean(y)) - D.LPM(1, 1, x, y, mean(x), mean(y)) - D.UPM(1, 1, x, y, mean(x), mean(y))) * (length(x) / (length(x) - 1)) sd.x = ((UPM(2, mean(x), x) + LPM(2, mean(x), x)) * (length(x) / (length(x) - 1))) ^ .5 sd.y = ((UPM(2, mean(y), y) + LPM(2, mean(y) , y)) * (length(y) / (length(y) - 1))) ^ .5 cov.xy / (sd.x * sd.y) ``` ## CDFs (Discrete and Continuous) ```{r cdfs,fig.align="center",fig.width=5,fig.height=3, results='hide'} P = ecdf(x) P(0) ; P(1) LPM(0, 0, x) ; LPM(0, 1, x) # Vectorized targets: LPM(0, c(0, 1), x) plot(ecdf(x)) points(sort(x), LPM(0, sort(x), x), col = "red") legend("left", legend = c("ecdf", "LPM.CDF"), fill = c("black", "red"), border = NA, bty = "n") # Joint CDF: Co.LPM(0, x, y, 0, 0) # Vectorized targets: Co.LPM(0, x, y, c(0, 1), c(0, 1)) # Copula # Transform x and y so that they are uniform u_x = LPM.ratio(0, x, x) u_y = LPM.ratio(0, y, y) # Value of copula at c(.5, .5) Co.LPM(0, u_x, u_y, .5, .5) # Continuous CDF: NNS.CDF(x, 1) # CDF with target: NNS.CDF(x, 1, target = mean(x)) # Survival Function: NNS.CDF(x, 1, type = "survival") ``` ## Numerical Integration Partial moments are asymptotic area approximations of $f(x)$ akin to the familiar Trapezoidal and Simpson's rules. More observations, more accuracy... $$[UPM(1,0,f(x))-LPM(1,0,f(x))]\asymp\frac{[F(b)-F(a)]}{[b-a]}$$ $$[UPM(1,0,f(x))-LPM(1,0,f(x))] *[b-a] \asymp[F(b)-F(a)]$$ ```{r numerical integration} x = seq(0, 1, .001) ; y = x ^ 2 (UPM(1, 0, y) - LPM(1, 0, y)) * (1 - 0) ``` $$0.3333 * [1-0] = \int_{0}^{1} x^2 dx$$ For the total area, not just the definite integral, simply sum the partial moments and multiply by $[b - a]$: $$[UPM(1,0,f(x))+LPM(1,0,f(x))] *[b-a]\asymp\left\lvert{\int_{a}^{b} f(x)dx}\right\rvert$$ ## Bayes' Theorem For example, when ascertaining the probability of an increase in $A$ given an increase in $B$, the `Co.UPM(degree_x, degree_y, x, y, target_x, target_y)` target parameters are set to `target_x = 0` and `target_y = 0` and the `UPM(degree, target, variable)` target parameter is also set to `target = 0`. $$P(A|B)=\frac{Co.UPM(0,0,A,B,0,0)}{UPM(0,0,B)}$$ # References If the user is so motivated, detailed arguments and proofs are provided within the following: * [Nonlinear Nonparametric Statistics: Using Partial Moments](https://github.com/OVVO-Financial/NNS/blob/NNS-Beta-Version/examples/index.md) * [Cumulative Distribution Functions and UPM/LPM Analysis](https://doi.org/10.2139/ssrn.2148482) * [Continuous CDFs and ANOVA with NNS](https://doi.org/10.2139/ssrn.3007373) * [f(Newton)](https://doi.org/10.2139/ssrn.2186471) * [Bayes' Theorem From Partial Moments](https://doi.org/10.2139/ssrn.3457377) ```{r threads, echo = FALSE} Sys.setenv("OMP_THREAD_LIMIT" = "") ```