Time-partitioning Gaussian Process Mixture Model
Organizations: Insper Institute of Education and Research, São Paulo
Abstract
Nonstationarity and heterogeneous dynamics are common in financial and macroeconomic time series. Volatility alternates between calm and turbulent regimes, interest rates follow monetary-policy cycles, and major events trigger persistent structural shifts. We propose the Time-partitioning Gaussian Process Mixture Model (TPGPMM), a Bayesian nonparametric framework for regime identification and nonstationary prediction that infers such regimes and their within-regime dependence from data, without Markovian assumptions. It combines (i) an adaptive Pitman-Yor process prior on ordered compositions, mapped to block lengths with contiguity enforced by construction, and (ii) regime-specific Gaussian processes for temporal dependence, yielding a nonstationary predictive distribution. By inferring its discount parameter, the prior adapts to homogeneous and highly heterogeneous regime lengths. Unlike sequential or Markov-switching methods, it flags persistent structural shifts as change points rather than reacting to transient shocks. A split-merge Metropolis-within-Gibbs sampler with exact Gibbs updates of regime boundaries jointly learns change points and hyperparameters in batch, quantifying uncertainty over the partition and within-regime dynamics. With an RBF kernel and a fixed, data-informed noise level, TPGPMM produces a sparse, confident segmentation. On simulated data it recovers the true regimes, and on the CBOE Volatility Index and the 10-year US Treasury yield it identifies regimes aligned with documented market and monetary-policy events. For prediction, variants estimating the noise level fit better than change-point baselines and fit and forecast better than the main specification, at the cost of a less sparse or less event-aligned segmentation; with a regime mean, they fit better than a fitted stationary Gaussian process and have lower forecast RMSE except at the shortest horizons.
Figures & tables
| Scenario | Method | (mean SD) | Precision | Recall | F1 | CP_MAE |
|---|---|---|---|---|---|---|
| homogeneous | TPGPMM | 10.3 0.7 | 0.968 | 0.998 | 0.981 | 0.21 1.41 |
| homogeneous | TPGPMM ( estimated) | 10.3 0.6 | 0.973 | 0.998 | 0.984 | 0.20 1.41 |
| homogeneous | TPGPMM (Matérn-3/2, estimated) | 10.0 0.2 | 0.996 | 0.996 | 0.996 | 0.40 1.98 |
| homogeneous | TPGPMM (Matérn-3/2, regime mean, estimated) | 10.0 0.2 | 0.996 | 0.996 | 0.996 | 0.40 1.98 |
| homogeneous | BOCPD | 11.1 1.3 | 0.844 | 0.938 | 0.885 | 4.98 5.56 |
| homogeneous | HDP-SLDS | 15.5 4.7 | 0.563 | 0.833 | 0.658 | 8.56 8.33 |
| Event (Date) | Market Impact |
|---|---|
| China “Black Monday” (2015-08-24) | China slowdown triggered U.S. liquidity strains. |
| Brexit Vote (2016-06-24) | Surprise “Leave” vote sparked global equity sell-offs. |
| “Volmageddon” (2018-02-05) | VIX spike driven by short-volatility deleveraging. |
| COVID Panic (2020-03-16) | Pandemic lockdowns caused acute funding strains. |
| Russia–Ukraine (2022-02-24) | Invasion led to risk sell-offs and commodity surges. |
| US Bank Turmoil (2023-03-10) | Silicon Valley Bank failure sparked bank solvency and rate volatility. |
| Event (Date) | Policy / market impact |
|---|---|
| Fed mid-cycle easing (2019-07-31) | First of three 2019 rate cuts as growth and trade-war risks mounted. |
| COVID emergency cuts (2020-03-15) | Policy rate cut to the zero lower bound; large-scale asset purchases. |
| Hawkish pivot (2021-12-15) | The Federal Open Market Committee (FOMC) accelerated tapering, signalling the 2022 tightening cycle. |
| Regime | Interpretation | Dates | Mean yield | Daily-change SD | Boundary post. prob. | |
|---|---|---|---|---|---|---|
| Normalisation and hiking cycle | 2015-01-02 to 2019-07-29 | bp | — | |||
| Mid-cycle easing | 2019-07-30 to 2020-03-19 | bp | ||||
| COVID; quantitative easing | 2020-03-20 to 2022-02-25 | bp | ||||
| Tightening onset | 2022-02-28 to 2022-06-10 | bp | ||||
| Restrictive policy | 2022-06-13 to 2023-12-29 | bp |
| Method | Target | RMSE | NLPD | CRPS | RMSE/sd | NLPD | CRPS/sd | |
|---|---|---|---|---|---|---|---|---|
| TPGPMM | VIX | |||||||
| TPGPMM ( estimated) | VIX | |||||||
| TPGPMM (Matérn-3/2, estimated) | VIX | |||||||
| TPGPMM (Matérn-3/2, regime mean, estimated) | VIX | |||||||
| Standard GP (RBF) | VIX | |||||||
| Standard GP (Matérn-3/2) | VIX |
| Method | Target | RMSE | NLPD | CRPS | RMSE/sd | NLPD | CRPS/sd | |
|---|---|---|---|---|---|---|---|---|
| TPGPMM | std. yield | |||||||
| TPGPMM ( estimated) | std. yield | |||||||
| TPGPMM (Matérn-3/2, estimated) | std. yield | |||||||
| TPGPMM (Matérn-3/2, regime mean, estimated) | std. yield | |||||||
| Standard GP (RBF) | std. yield | |||||||
| Standard GP (Matérn-3/2) | std. yield |
| RMSE/sd | CRPS/sd | |||||||||
| Model | 2 | 3 | 4 | 5 | 2 | 3 | 4 | 5 | ||
| TPGPMM | 0.706 | 0.893 | 1.069 | 1.237 | 1.400 | 0.369 | 0.473 | 0.574 | 0.671 | 0.761 |
| TPGPMM ( estimated) | 0.636 | 0.846 | 1.046 | 1.243 | 1.435 | 0.322 | 0.436 | 0.544 | 0.649 | 0.752 |
| TPGPMM (Matérn-3/2, estimated) | 0.548 | 0.780 | 0.978 | 1.146 | 1.288 | 0.272 | 0.397 | 0.501 | 0.590 | 0.674 |
| TPGPMM (Matérn-3/2, regime mean, estimated) | 0.476 | 0.664 | 0.796 | 0.886 | 0.940 | 0.227 | 0.325 | 0.392 | 0.441 | 0.482 |
| Standard GP (RBF) | 0.503 | 0.726 | 0.886 | 0.978 | 1.003 | 0.249 | 0.360 | 0.440 | 0.496 | 0.533 |
| RMSE/sd | CRPS/sd | |||||||||
| Model | 2 | 3 | 4 | 5 | 2 | 3 | 4 | 5 | ||
| TPGPMM | 0.331 | 0.433 | 0.530 | 0.632 | 0.729 | 0.194 | 0.247 | 0.301 | 0.359 | 0.414 |
| TPGPMM ( estimated) | 0.282 | 0.386 | 0.484 | 0.595 | 0.699 | 0.158 | 0.216 | 0.272 | 0.339 | 0.403 |
| TPGPMM (Matérn-3/2, estimated) | 0.265 | 0.428 | 0.525 | 0.639 | 0.725 | 0.149 | 0.246 | 0.320 | 0.406 | 0.483 |
| TPGPMM (Matérn-3/2, regime mean, estimated) | 0.250 | 0.383 | 0.448 | 0.531 | 0.595 | 0.141 | 0.222 | 0.274 | 0.330 | 0.377 |
| Standard GP (RBF) | 0.291 | 0.447 | 0.597 | 0.761 | 0.909 | 0.161 | 0.246 | 0.331 | 0.429 | 0.517 |
Appendix figures & tables7 assets
Supplementary material from the paper’s appendix.
Appendix
| Specification | Kernel | Regime mean | Noise level |
|---|---|---|---|
| TPGPMM | RBF | no | fixed at |
| TPGPMM ( estimated) | RBF | no | estimated |
| TPGPMM (Matérn-3/2, estimated) | Matérn-3/2 | no | estimated |
| TPGPMM (Matérn-3/2, regime mean, estimated) | Matérn-3/2 | yes | estimated |
| Term | Without it | Check |
| Dimension-matched split with exact inverse merge (Prop. 1 ) | Split and merge are not inverse maps; the reversible-jump ratio is undefined | Prior-only runs |
| Normalising constants of the hyperpriors (Prop. 2 ) | Target multiplied by | Prior-only law of |
| Log-scale Jacobian of the random walk (Prop. 4 ) | Prior of and shifted by ( , ) | Prior-only marginals |
| Truncation constant in the updates (Prop. 5 ) | Hyperprior tilted to mean , | Prior-only KS tests; exact sampler |
| Adaptation during burn-in only | Retained chain is not a fixed Markov kernel | — |
| Gibbs draw of the boundaries (Prop. 3 ) | Uniform shuffles, mostly rejected | ESS (Appendix H ) |
| Block | |||
|---|---|---|---|
| 1 | 25.0 | 0.85 | 0.0 |
| 2 | 8.0 | 0.70 | 1.8 |
| 3 | 6.0 | 0.75 | |
| 4 | 10.0 | 0.70 | 1.6 |
| 5 | 7.0 | 0.70 | |
| 6 | 12.0 | 0.65 | 1.7 |
| Series | Specification | acc split | acc merge | moved Gibbs | ESS K | ESS σ | ESS θ | (max) | min/chain |
|---|---|---|---|---|---|---|---|---|---|
| VIX | TPGPMM | 0.055 | 0.055 | 0.439 | 143 | 7336 | 3013 | 1.031 | 8.3 |
| VIX | TPGPMM ( estimated) | 0.065 | 0.064 | 0.381 | 12 | 14083 | 51 | 1.266 | 5.3 |
| VIX | TPGPMM (Matérn-3/2, estimated) | 0.061 | 0.061 | 0.354 | 544 | 3452 | 10183 | 1.006 | 50.0 |
| VIX | TPGPMM (Matérn-3/2, regime mean, estimated) | 0.147 | 0.145 | 0.452 | 88 | 8470 | 280 | 1.047 | 6.5 |
| Treasury | TPGPMM | 0.126 | 0.127 | 0.780 | 387 | 1762 | 4441 | 1.011 | 13.8 |
| Treasury | TPGPMM ( estimated) | 0.095 | 0.091 | 0.539 | 26 | 4604 | 158 | 1.139 | 2.0 |
| Series | Method | (95% interval) | ||||
|---|---|---|---|---|---|---|
| VIX | Exact, 210-point grid | 14.43 [11, 18] | 0.072 | 3.67 | 0.227 | 0.24 |
| VIX | Exact, 783-point grid | 13.48 [10, 18] | 0.083 | 3.51 | 0.029 | 0.15 |
| VIX | Exact, 1,760-point grid | 13.69 [11, 18] | 0.082 | 3.58 | 0.049 | 0.14 |
| VIX | TPGPMM chains (MCMC) | 13.44 [11, 17] | 0.090 | 3.56 | — | — |
| Treasury | Exact, 210-point grid | 7.04 [5, 10] | 0.359 | 5.01 | 0.045 | 0.09 |
| Treasury | Exact, 783-point grid | 6.97 [5, 10] | 0.367 | 5.17 | 0.030 | 0.03 |