Introduction

The wavelet analysis of a time series can be defined in terms of an orthonormal transform, sohere we briefly review the key ideas behind such transforms. We first review the basic theory fororthonormal transforms in Section 3.1. Section 3.2 discusses the important projection theorem, while3.3 considers complex-valued transforms. Prior to introducing the discrete wavelet transform (DWT)in Chapter 4, we discuss the orthonormal discrete Fourier transform (ODFT) in Section 3.4 because itparallels and contrasts the DWT in a number of interesting ways. We summarize the key points of thischapter in Section 3.5 - readers who are already comfortable with orthonormal transforms can readthis section simply to become familiar with our notation and conventions.

Basic Theory for Orthonormal Transforms

Orthonormal transforms are of interest because they can be used to re-express a time series insuch a way that we can easily reconstruct the series from its transform. In a loose sense, the‘information’ in the transform is thus equivalent to the ‘information’in the original series; to put it another way, the series and its transform can be considered to betwo representations of the same mathematical entity. Orthonormal transforms can be used tore-express a series in a standardized form (e.g., a Fourier series) for further manipulation, toreduce a series to a few values summarizing its salient features (compression), and to analyze aseries to search for particular patterns of interest (e.g., analysis of variance).

Introduction

In subsequent chapters we will make substantial use of some basic results from the Fourier theoryof sequences and – to a lesser extent – functions, and we will find that filters playa central role in the application of wavelets. This chapter is intended as a self-contained guide tosome key results from Fourier and filtering theory. Our selection of material is intentionallylimited to just what we will use later on. For a more thorough discussion employing the samenotation and conventions adopted here, see Percival and Walden (1993). We also recommend Briggs andHenson (1995) and Hamming (1989) as complementary sources for further study.

Readers who have extensive experience with Fourier analysis and filters can just quickly scanthis chapter to become familiar with our notation and conventions. We encourage others to study thematerial carefully and to work through as many of the embedded exercises as possible (answers areprovided in the appendix). It is particularly important that readers understand the concept ofperiodized filters presented in Section 2.6 since we use this idea repeatedly in Chapters 4 and5.

Complex Variables and Complex Exponentials

The most elegant version of Fourier theory for sequences and functions involves the use ofcomplex variables, so here we review a few key concepts regarding them (see, for example, Brown andChurchill, 1995, for a thorough treatment). Let i ≡ √–1 sothat i2 = –1 (throughout the book, we take‘≡’ to mean ‘equal by definition’).

Introduction

As discussed in Chapter 4, the discrete wavelet transform (DWT) allows us to analyze (decompose) a time series X into DWT coefficients W, from which we can then synthesize (reconstruct) our original series. We have already noted that the synthesis phase can be used, for example, to construct a multiresolution analysis of a time series (see Equation (64) or (104a)) and to simulate long memory processes (see Section 9.2). In this chapter we study another important use for the synthesis phase that provides an answer to the signal estimation (or function estimation, or denoising) problem, in which we want to estimate a signal hidden by noise within an observed time series. The basic idea here is to modify the elements of W to produce, say, W′, from which an estimate of the signal can be synthesized. With the exception of methods briefly discussed in Section 10.8, once certain parameters have been estimated, the elements Wn of W are treated one at a time; i.e., how we modify Wn is not directly influenced by the remaining DWT coefficients. The wavelet-based techniques that we concentrate on here are thus conceptually very simple, yet they are remarkably adaptive to a wide variety of signals.

Introduction

Wavelets are mathematical tools for analyzing time series or images (although not exclusively so:for examples of usage in other applications, see Stollnitz et al., 1996, andSweldens, 1996). Our discussion of wavelets in this book focuses on their use with time series,which we take to be any sequence of observations associated with an ordered independent variablet (the variable t can assume either a discrete set of values suchas the integers or a continuum of values such as the entire real axis - examples of both typesinclude time, depth or distance along a line, so a time series need not actually involve time).Wavelets are a relatively new way of analyzing time series in that the formal subject dates back tothe 1980s, but in many aspects wavelets are a synthesis of older ideas with new elegant mathematicalresults and efficient computational algorithms. Wavelet analysis is in some cases complementary toexisting analysis techniques (e.g., correlation and spectral analysis) and in other cases capable ofsolving problems for which little progress had been made prior to the introduction of wavelets.

Broadly speaking (and with apologies for the play on words!), there have been two main waves ofwavelets. The first wave resulted in what is known as the continuous wavelet transform (CWT), whichis designed to work with time series defined over the entire real axis; the second, in the discretewavelet transform (DWT), which deals with series defined essentially over a range of integers(usually t = 0, 1,…,N – 1, where Ndenotes the number of values in the time series). In this chapter we introduce and motivate waveletsvia the CWT.

Introduction

Here we introduce the discrete wavelet transform (DWT), which is the basic tool needed forstudying time series via wavelets and plays a role analogous to that of the discrete Fouriertransform in spectral analysis. We assume only that the reader is familiar with the basic ideas fromlinear filtering theory and linear algebra presented in Chapters 2 and 3. Our exposition buildsslowly upon these ideas and hence is more detailed than necessary for readers with strongbackgrounds in these areas. We encourage such readers just to use the Key Facts and Definitions ineach section or to skip directly to Section 4.12 – this has a concise self-containeddevelopment of the DWT. For complementary introductions to the DWT, see Strang (1989, 1993), Riouland Vetterli (1991), Press et al. (1992) and Mulcahy (1996).

The remainder of this chapter is organized as follows. Section 4.1 gives a qualitativedescription of the DWT using primarily the Haar and D(4) wavelets as examples. The formalmathematical development of the DWT begins in Section 4.2, which defines the wavelet filter anddiscusses some basic conditions that a filter must satisfy to qualify as a wavelet filter. Section4.3 presents the scaling filter, which is constructed in a simple manner from the wavelet filter.The wavelet and scaling filters are used in parallel to define the pyramid algorithm for computing(and precisely defining) the DWT – various aspects of this algorithm are presented inSections 4.4, 4.5 and 4.6.

The last decade has seen an explosion of interest in wavelets, a subject area that has coalescedfrom roots in mathematics, physics, electrical engineering and other disciplines. As a result,wavelet methodology has had a significant impact in areas as diverse as differential equations,image processing and statistics. This book is an introduction to wavelets and their application inthe analysis of discrete time series typical of those acquired in the physical sciences. While wepresent a thorough introduction to the basic theory behind the discrete wavelet transform (DWT), ourgoal is to bridge the gap between theory and practice by

1. • emphasizing what the DWT actually means in practical terms;

2. • showing how the DWT can be used to create informative descriptive statistics fortime series analysts;

3. • discussing how stochastic models can be used to assess the statisticalproperties of quantities computed from the DWT; and

4. • presenting substantive examples of wavelet analysis of time seriesrepresentative of those encountered in the physical sciences.

To date, most books on wavelets describe them in terms of continuous functions and oftenintroduce the reader to a plethora of different types of wavelets. We concentrate on developingwavelet methods in discrete time via standard filtering and matrix transformation ideas.

Introduction

The continuous time wavelet transform is becoming a well-established tool for multiple scale representation of a continuous time ‘signal,’ which by definition is a finite energy function denned over the entire real axis. This transform essentially correlates a signal with ‘stretched’ versions of a wavelet function (in essence a continuous time band-pass filter) and yields a multiresolution representation of the signal. In this chapter we summarize the important ideas and results for the multiresolution view of the continuous time wavelet transform. Our primary intent is to demonstrate the close relationship between continuous time wavelet analysis and the discrete time wavelet analysis presented in Chapter 4. To make this connection, we adopt a formalism that allows us to bridge the gap between the inner product convention used in mathematical discussions on wavelets and the filtering convention favored by engineers. For simplicity we deal only with signals, scaling functions and wavelet functions that are all taken to be real-valued. Only the case of dyadic wavelet analysis (where the scaling factor in the dilation of the basis function takes the value of two) is considered here.

Introduction

As we saw in Chapters 4 and 5, one important use for the discrete wavelet transform (DWT) and its variant, the maximal overlap DWT (MODWT), is to decompose the sample variance of a time series on a scale-by-scale basis. In this chapter we explore wavelet-based analysis of variance (ANOVA) in more depth by defining a theoretical quantity known as the wavelet variance (sometimes called the wavelet spectrum). This theoretical variance can be readily estimated based upon the DWT or MODWT and has been successfully used in a number of applications; see, for example, Gamage (1990), Bradshaw and Spies (1992), Flandrin (1992), Gao and Li (1993), Hudgins et al. (1993), Kumar and Foufoula-Georgiou (1993, 1997), Tewfik et al. (1993), Wornell (1993), Scargle (1997), Torrence and Compo (1998) and Carmona et al. (1998). The definition for the wavelet variance and rationales for considering it are given in Section 8.1, after which we discuss a few of its basic properties in Section 8.2. We consider in Section 8.3 how to estimate the wavelet variance given a time series that can be regarded as a realization of a portion of length N of a stochastic process with stationary backward differences. We investigate the large sample statistical properties of wavelet variance estimators and discuss methods for determining an approximate confidence interval for the true wavelet variance based upon the estimated wavelet variance (Section 8.4).

Introduction

In Chapter 4 we discussed the discrete wavelet transform (DWT), which essentially decomposes atime series X into coefficients that can be associated with different scales and times. We can thusregard the DWT of X as a ‘time/scale’ decomposition. The wavelet coefficients for agiven scale Tj ≡ 2J−1 tell ushow localized weighted averages of X vary from one averaging period to the next. The scaleTj gives us the effective width in time (i.e., degree of localization)of the weighted averages. Because the DWT can be formulated in terms of filters, we can relate thenotion of scale to certain bands of frequencies. The equivalent filter that yields the waveletcoefficients for scale Tj is approximately a band-pass filter with apass-band given by [l/2j+1, 1/2j].For a sample size N = 2J, the N - 1wavelet coefficients constitute - when taken together - an octave band decomposition of thefrequency interval [1/2J+1, 1/2], while the single scalingcoefficient is associated with the interval [0, 1/2J+1]. Taken asa whole, the DWT coefficients thus decompose the frequency interval [0, 1/2] into adjacentindividual intervals.

In this chapter we consider the discrete wavelet packet transform (DWPT), whichcan be regarded as any one of a collection of orthonormal transforms, each of which can be readilycomputed using a very simple modification of the pyramid algorithm for the DWT.