Related papers: Complexity-based Financial Stress Evaluation
We propose to examine the predictability and the complexity characteristics of the Standard&Poor500 dynamics behaviors in a coarse-grained way using the symbolic dynamics method and under the prism of the Information theory through the…
We consider different levels of complexity which are observed in the empirical investigation of financial time series. We discuss recent empirical and theoretical work showing that statistical properties of financial time series are rather…
The financial markets are understood as complex dynamical systems whose dynamics is analysed mostly using nonstationary and brief data sets that usually come from stock markets. For such data sets, a reliable method of analysis is based on…
We construct a continuous time model for price-mediated contagion precipitated by a common exogenous stress to the banking book of all firms in the financial system. In this setting, firms are constrained so as to satisfy a risk-weight…
This paper investigates the structural dynamics of stock market volatility through the Financial Chaos Index, a tensor- and eigenvalue-based measure designed to capture realized volatility via mutual fluctuations among asset prices.…
We investigate whether fractal markets hypothesis and its focus on liquidity and invest- ment horizons give reasonable predictions about dynamics of the financial markets during the turbulences such as the Global Financial Crisis of late…
We investigate the relative information efficiency of financial markets by measuring the entropy of the time series of high frequency data. Our tool to measure efficiency is the Shannon entropy, applied to 2-symbol and 3-symbol…
We investigate entropy as a financial risk measure. Entropy explains the equity premium of securities and portfolios in a simpler way and, at the same time, with higher explanatory power than the beta parameter of the capital asset pricing…
A financial system contains many elements networked by their relationships. Extensive works show that topological structure of the network stores rich information on evolutionary behaviors of the system such as early warning signals of…
We study the ex-ante minimization of market inefficiency, defined in terms of minimum deviation of market prices from fundamental values, from a centralized planner's perspective. Prices are pressured from exogenous trading actions of…
The instability of historical risk factor correlations renders their use in estimating portfolio risk extremely questionable. In periods of market stress correlations of risk factors have a tendency to quickly go well beyond estimated…
I construct a Market Stress Probability Index (MSPI) that estimates the probability of high stress in the U.S. equity market one month ahead using information from the cross-section of individual stocks. Using CRSP daily data, each month is…
Gold and currency markets form a unique pair with specific interactions and dynamics. We focus on the efficiency ranking of gold markets with respect to the currency of purchase. By utilizing the Efficiency Index (EI) based on fractal…
Most finance studies are discussed on the basis of several hypotheses, for example, investors rationally optimize their investment strategies. However, the hypotheses themselves are sometimes criticized. Market impacts, where trades of…
Physical analogs have shown considerable promise for understanding the behavior of complex adaptive systems, including macroeconomics, biological systems, social networks, and electric power markets. Many of today's most challenging…
We present a financial market model, characterized by self-organized criticality, that is able to generate endogenously a realistic price dynamics and to reproduce well-known stylized facts. We consider a community of heterogeneous traders,…
We demonstrate using multi-layered networks, the existence of an empirical linkage between the dynamics of the financial network constructed from the market indices and the macroeconomic networks constructed from macroeconomic variables…
This paper investigates the degree of efficiency for the Moscow Stock Exchange. A market is called efficient if prices of its assets fully reflect all available information. We show that the degree of market efficiency is significantly low…
Standard approaches to the theory of financial markets are based on equilibrium and efficiency. Here we develop an alternative based on concepts and methods developed by biologists, in which the wealth invested in a financial strategy is…
In this article, the long-term behavior of the stock market index of the New York Stock Exchange is studied, for the period 1950 to 2013. Specifically, the CRSP Value-Weighted and CRSP Equal-Weighted index are analyzed in terms of market…