Algorithmic Complexity of Real Financial Markets
Statistical Mechanics
2009-10-31 v1 Disordered Systems and Neural Networks
Adaptation and Self-Organizing Systems
Statistical Finance
Abstract
A new approach to the understanding of the complex behavior of financial markets index using tools from thermodynamics and statistical physics is developed. Physical complexity, a magnitude rooted in the Kolmogorov-Chaitin theory is applied to binary sequences built up from real time series of financial markets indices. The study is based on NASDAQ and Mexican IPC data. Different behaviors of this magnitude are shown when applied to the intervals of series placed before crashes and in intervals when no financial turbulence is observed. The connection between our results and The Efficient Market Hypothesis is discussed.
Keywords
Cite
@article{arxiv.cond-mat/0005441,
title = {Algorithmic Complexity of Real Financial Markets},
author = {Ricardo Mansilla},
journal= {arXiv preprint arXiv:cond-mat/0005441},
year = {2009}
}
Comments
13 pages, 4 figures, submitted to European Physical Journal B