Imputation of Missing Values in Economic and Financial Time Series Data Using Five Principal Component Analysis (PCA) Approaches

Abstract

This study assessed five approaches for imputing missing values. The evaluated methods include Singular Value Decomposition Imputation (svdPCA), Bayesian imputation (bPCA), Probabilistic imputation (pPCA), Non-Linear Iterative Partial Least squares imputation (nipalsPCA) and Local Least Squares imputation (llsPCA). A 5%, 10%, 15% and 20% missing data were created under a missing completely at random (MCAR) assumption using five (5) variables (Net Foreign Assets (NFA), Credit to Core Private Sector (CCP), Reserve Money (RM), Narrow Money (M1), Private Sector Demand Deposits (PSDD) from Nigeria quarterly monetary aggregate dataset from 1981 to 2019 using R-software. The data were collected from the Central Bank of Nigeria statistical bulletin. The five imputation methods were used to estimate the artificially generated missing values. The performances of the PCA imputation approaches were evaluated based on the Mean Forecast Error (MFE), Root Mean Squared Error (RMSE) and Normalized Root Mean Squared Error (NRMSE) criteria. The result suggests that the bPCA, llsPCA and pPCA methods performed better than other imputation methods with the bPCA being the more appropriate method and llsPCA, the best method as it appears to be more stable than others in terms of the proportion of missingness.