R/EWMA.Cov.R

In yanyachen/arimaMisc: Time Series Analysis Miscellaneous Tools

#' @title Compute the exponentially weighted moving average covariance matrix
#'
#' @description
#' Compute the exponentially weighted moving average covariance matrix.
#'
#' @param rtn return series
#' @param theta exponetial decay factor between 0 and 1
#' @return exponentially weighted moving average covariance matrix
#' @importFrom stats filter
#' @export

EWMA.Cov <- function(rtn, theta=0.94){
  # Pre-Processing
  rtn <- as.matrix(rtn)
  S <- 1e-6
  if(theta < S){
    theta <- 0.9
  }else if(theta > (1-S)){
    theta <- 0.98
  }
  # Covariance
  k <- dim(rtn)[2]
  T <- dim(rtn)[1]
  V <- NULL
  for (i in 1:k){
    x <- rtn[,i]
    Mean <- mean(x^2)
    e <- (1-theta)*c(Mean,x[-T]^2)
    v <- filter(e,theta,"r",init=Mean)
    V <- cbind(V,v)
  }
  for (i in 1:(k-1)){
    for (j in (i+1):k){
      x <- rtn[,i]*rtn[,j]
      Mean <- mean(x)
      e <- (1-theta)*c(Mean,x[-T])
      v <- filter(e,theta,"r",init=Mean)
      V <- cbind(V,v)
    }
  }
  return(V)
}