Segmentation procedure based on Fisher's exact test and its application to foreign exchange rates

Abstract: This study proposes the segmentation procedure of univariate time series based on Fisher's exact test. We show that an adequate change point can be detected as the minimum value of p-value. It is shown that the proposed procedure can detect change points for an artificial time series. We apply the proposed method to find segments of the foreign exchange rates recursively. It is also applied to randomly shuffled time series. It concludes that the randomly shuffled data can be used as a level to determine the null hypothesis.