# Change-Point Analysis. Dr. Wayne A. Taylor

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1 Change-Point Analysis Dr. Wayne A. Taylor 1

2 Change-Point Analysis Did it change? Did more than one change occur? When did the changes occur? With what confidence? 2

3 Differences Control Chart: Update after each data point Controls point-wise error rate Optimal for isolated abnormal point Change-Point Analysis Used for historical data Controls change-wise error rate Optimal for level shifts 3

4 Compliment Each Other Use control chart on point-by-point basis to detect abnormal points and large shifts Periodically perform a change-point analysis to identify more minor shifts 4

5 Example: Trade Deficits (\$ billions) Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

6 Plot - Trade Deficit 18 Plot of Trade Deficit Trade Deficit 12 6 Jan '87 Apr '87 Jul '87 Oct '87 Jan '88 Apr '88 Jul '88 Oct '88 Month 6

7 Individuals Chart 18 Plot of Trade Deficit Trade Deficit 12 6 Jan '87 Apr '87 Jul '87 Oct '87 Jan '88 Apr '88 Jul '88 Oct '88 Month 7

8 Individuals Chart While a shift seems evident, the chart barely detects a single offtarget point. (Oct 87) How do you interpret this out of control point? 8

9 Change Point Analysis Table of Significant Changes for Trade Deficit Confidence Level = 90%, Confidence Interval = 95%, Bootstraps = 1000, Sampling With Replacement Month Confidence Interval Conf. Level From To Level Jun '87 (May '87, Sep '87) 92.6% Dec '87 (Dec '87, Feb '88) 99.4%

10 Plot Showing Changes 18 Trade Deficit 12 6 Jan '87 Apr '87 Jul '87 Oct '87 Jan '88 Apr '88 Jul '88 Oct '88 Month 10

11 Advantages of Change Point Analysis Can identify multiple changes Better characterizes changes More powerful than a control chart at detecting smaller sustained changes Avoids false detections by controlling change-wise error rate. 11

12 Procedure Based on CUSUM chart Bootstrap analysis Iterative to detect multiple changes 12

13 CUSUM - Trade Deficit CUSUM CUSUM Chart of Trade Deficit S diff = Jan '87 Apr '87 Jul '87 Oct '87 Jan '88 Apr '88 Jul '88 Oct '88 Month 13

14 Bootstrap Analysis CUSUM Original Order 1st Bootstrap 2nd Bootstrap 3rd Bootstrap 4th Bootstrap 5th Bootstrap Jan '87 Mar '87 May '87 Jul '87 Sep '87 Nov '87 Jan '88 Mar '88 May '88 Jul '88 Sep '88 Nov '88 Month 14

15 Bootstrap Analysis Number S diff = S 0 diff 15

16 Iterative Procedure Once first change is detected: Estimate time of change Split data at this point and repeat analysis Reestimation and point elimination procedures are also incorporated into the routine 16

17 Complaint Data Example 1000 Complaints Jan Feb Mar Apr May Jun Jul Aug Month 17

18 Complaints - Changes Table of Significant Changes for Complaints Confidence Level = 90%, Confidence Interval = 95%, Bootstraps = 1000, Sampling Without Replacement Lot Confidence Interval Conf. Level From To Level 42 (42, 73) 100% (72, 86) 100% (78, 162) 91% (147, 188) 98% (209, 225) 98% (214, 228) 98%

19 Complaints - CUSUM 500 CUSUM Lot 19

20 Complaints - Conclusion Problem started around lot 42 Problem jumped up to current level around lot 74 (within a couple of days of) Changes at end are due to incomplete data 20

21 More Advantages Flexible same procedure handles attribute, count and variables data Handles massive data sets with multiple changes producing hundreds of out-of-control points on a control chart Robust to outliers 21

22 Applications Problem Solving: To pinpoint time and nature of change Manufacturing: Use whenever Shewhart chart detects out of control point to better understand change Recalls: To accurate determine fence in defensible a fashion 22

23 Applications Bio and Particle Counts: Easily handles ill-behaved data Financial and Performance Data: Much more powerful than individuals chart, nearoptimal against level shifts Massive and Messy Data Sets: Controls overall error rate, distribution free, and robust to outlyers 23

24 So Easy Even Management Can Use It From Excel, just highlight the data add select the change-point analysis menu item from the Tools menu. Outliers are highlighted. All assumptions are automatically checked. Flexibility Simplicity 24

25 Additional Information This paper and others are posted on the website Shareware package Change-Point Analyzer can be downloaded from same website. 25

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