The aim of this paper is to investigate the problem of finding the efficient number of clusters in fuzzy time series. The clustering process has been discussed in the existing literature, and a number of methods have been suggested. These methods have several drawbacks, especially the lack of cluster shape and quantity optimization. There are two critical dimensions in a fuzzy time series clustering: the selection of a proper interval for fuzzy clusters and the optimization of the membership degrees among the fuzzy cluster set. The existing methods for the interval selection assume that the intended data has a short-tailed distribution, and the cluster intervals are established in identical lengths (e.g. Song and Chissom, 1994; Chen, 1996; Yolcu et al., 2009). However, the time series data (particularly in economic research) is rarely short-tailed and mostly converges to long-tail distribution because of the boom-bust market behavior. This paper proposes a novel clustering method named histogram damping partition (HDP) to define sub-clusters on the standard deviation intervals and truncate the histogram of the data by a constraint based on the coefficient of variation. The HDP approach can be used for many different kinds of fuzzy time series models at the clustering stage. 
A non-linear clustering method for fuzzy time series: Histogram damping partition under the optimized cluster paradox