Hold a mirror up to nature: A new approach on correlation evaluation with fuzzy data and its applications in econometrics

Abstract

© 2013 by World Scientific Publishing Co. Pte. Ltd. All rights reserved. How to evaluate an appropriate correlation with fuzzy data is an important topic in the economics. Especially when the data illustrated is an uncertain, inconsistent and incomplete type. Traditionally, we use Pearson’s Correlation Coefficient to measure the correlation between data with real value. However, when the data are composed of fuzzy numbers, it is not feasible to use such a traditional approach to determine the fuzzy correlation coefficient. This study proposes the calculation of fuzzy correlation with fuzzy data: Interval, triangular and trapezoidal. Empirical studies are used to illustrate the application for evaluating fuzzy correlations. More related practical phenomena can be explained by this appropriate definition of fuzzy correlation.