An Approach to Data Analysis with N-Dimensional Skew

There is probably already a standard approach for the problem which I am calling n-dimensional skew but I don’t know what it is, and I’m not even sure I named the problem in a standard way, but I thought of a cool solution to a real data analysis problem so I am going to talk about it.

This is an approach for analyzing data when it is skewed in all sorts of directions, not just the standard 1-dimensional kind of skew called skewness. The proposed solution is to construct an angular probability function. Let’s consider a real life example with 2-dimensional skew: The fluctuation of personal expenditure with age.

The x-axis is age in years and the y axis is cost of expenditure, for a particular expenditure not the total per year. As a result we have many particular expenditures at each year.

  1. One might notice that bottom-line expenses are relatively constant while top-line expenses grow with respect to age.
    1. A mechanism might be that food costs are somewhat constant in real terms while consumption of big-ticket items like cars, houses, and caring for dependents increase with age.
  2. One problem in traditional analysis of such data, particularly with forecasting, is that traditional econometric approaches make assumptions about the vertical skew of that data.
    1. An OLS, for example, entirely ignores changes in what I am calling vertical skew. That is, the y-values for a particular x-value have some skew of their own.
    2. OLS doesn’t discern between the top and bottom of a distribution, and I think it goes through the mean at each point. I’m pretty sure the assumption of homoscedasticity is a formalization of this ignorance. Or that the errors are normal, following a normal distribution, as opposed to a skewed one.
  3. So in this example if top line expenditures are increasing and the bottom line is constant then we can see the so-called vertical skew is increasing with respect to age.
  4. One approach is to estimate the top-line and bottom line separately, then make some assumption about the vertical distribution for any particular age. Perhaps the vertical distribution follows a regular pattern. For example so far we have assumed that the skew is always in a single direction increasing strictly with age, perhaps even proportionally.
  5. Now consider that the bottom line is decreasing as the top line is increasing, but at different rates. Moreover, the patterns reverse at retirement age.
    1. It is now a more precise approach to estimate three trends: a median trend, the top line trend, and the bottom trend. Previously the median trend was implicit in the others.
    2. We start to see that it may be difficult to create a generic distribution change function.
  6. Now consider that the reversal at retirement is asymmetrical. Finally, consider that there are many such asymmetric pivot points.
    1. Perhaps the reversal in bottom-line expenditure is proportionally smaller than the reversal in top-line expenditure, because we cut way back on luxuries after retirement, but we only barely cut back on groceries.
    2. Not only is there a pivot-point at retirement age, but there could be one at the legal smoking age, the legal drinking age, the average age of marriage, and several others.
    3. It is relatively clear that a generic distribution change function is at best subject to a large degree of error relative to an alternative, and at worst entirely unfeasible to construct, where the alternative is an angular probability function.
  7. There are two approaches to angular probability here described, and a range of approaches between them. There is a simple approach and a complex approach. In the simple approach we estimate the full angular probability distribution of a point of interest and we assume that all points in the respective estimate paths conform to a constant function of change.

The Angular Probability Function

  1. In the expenditure by age example we might estimate the top-line trend has a constant rate of change and the bottom-line path has a constant change of 0.
  2. These trends can be expressed as functions of age, but they can also be expressed recursively as functions of prior expenditure and an angular probability.
  3. Consider that a movement from (x1,y1) to (x2,y2) entails some 2-space angle. We can pair each possible movement to a probability. These probabilities can be chained to create trend probabilities. There is a simple approach and a complex approach.
  4. Simple approach: We estimate an angular probability function at the beginning of the distribution, or perhaps some other point of interest.
    1. In the expenditure example this would be at age 1 or perhaps 0.
    2. Each path is now a function of the some angle.
    3. There are a variety of variations on the definition of the angle idea. For example, an angle of 90 might be the straightforward angle when dealing with degrees.
    4. On the other hand, the 0-angle might be horizontal with respect to X, allowing the straight down angle to be -.5(pi) in radians. This might be mathematically desirable if the lower half of the distribution tends in a negative direction.
    5. We can estimate these trends with a continuous function across all possible angles, or using a piecewise function or set of functions. Perhaps 1 path per degree.
  5. In the complex approach we do not hold that trends on a particular path conform to some constant change function. Instead, every point has its own change function.
    1. In the complex approach there is no such thing as a trend function. Every point has its own change function.
    2. In this approach a point becomes an object rather than a coordinate or positional value. It is a position value with a separate attribute which is an angular change function.
    3. We could be really crazy and allow a 360-degree change function instead of a simple forward-trajectory approach. In fact, why stop at 360 degrees? We could allow for n-dimensional probabilistic movement paths from a given point.
    4. The benefit of this approach is good old fashioned precision. We can handle all sorts of distribution shapes with respect to any number of factors and still capture distributional effects.
      1. You could have a distribution with a large circular or oval shaped gap right in the middle and it wouldn’t reduce precision.
      2. Star shapes? Yes, there are some implications for error when there is a discontinuous change, at least if we use continuous functions to describe the angular probability function, which we probably would.
      3. Although ostensibly you could use a crazy large database map or matrix instead of a continuous function to describe the possible movement paths and their probabilities.

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