Separating an Outlier from a Change

Can Emre Koksal

Abstract:

We study the change detection problem with an unknown post-change distribution. Under this constraint,
the unknown change in the distribution of observations may occur in many ways without much structure on the
observations, whereas, before the change point, a false alarm (outlier) is highly structured, following a particular
sample path. We first characterize these likely events for the deviation and propose a method to test the empirical
distribution, relative to the most likely way for it to occur as an outlier. We benchmark our method with finite moving
average (FMA) and generalized likelihood ratio tests (GLRT) under 4 different performance criteria including the
run time time complexity. Finally, we apply our method on economic market indicators and climate data. Our
method successfully captures the regime shifts during times of historical significance for the markets and identifies
the current climate change phenomenon to be a highly likely regime shift rather than a random event.