An Introduction to Wavelets and Other Filtering Methods in Finance and Economics

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INTRODUCTION

The fundamental reason of writing this book is that we believe the basic premise of wavelet filtering provides insight into the dynamics of economic/financial time series beyond that of current methodology. A number of concepts such as nonstationarity, multiresolution and approximate decorrelation emerge from wavelet filters. Wavelet filtering provides a natural platform to deal with the time-varying characteristics found in most real-world time series, and thus the assumption of stationarity may be avoided. Wavelet filters provide an easy vehicle to study the multiresolution properties of a process. It is important to realize that economic/financial time series may not need to follow the same relationship as a function of time ...