Taxonomy of commodities assets via complexity-entropy causality plane

Leonardo H.S. Fernandes and Fernando H.A. Araújo

Chaos, Solitons & Fractals, 2020, vol. 137, issue C

Abstract: This paper promotes insights based on an empirical analysis of the complex dynamics of 12 significant assets of the commodity market. We applied the Complexity-entropy causality plane (CECP) to quantify the permutation entropy and appropriate statistical complexity measures consider time series of monthly spot and futures prices of these records, which made it possible to map the commodities assets and their respective locations along the CECP. The results obtained from our procedure fitting show that the price dynamics behavior varies widely along the plane from the lower-right region, characterized by high entropy and low complexity to the middle region of the plane, marked by more complex and less entropic. It suggests that the commodities that are located in the lower-right region are closer to their fundamental prices, so they are more efficient, while the commodities start pricing lies significantly farther from the right corner are more susceptible to speculative activities and present a low degree of efficiency. We also used the Bandt-Pompe permutation entropy and the Jensen-Shannon statistical complexity to elaborate the taxonomy of this market based on the complexity hierarchy, which expands the understanding inherent of the phenomenology of this important economic aggregate and can support the work of policymakers. Additionally, we proposed a novel Macrophysics policy that can be adopted as an alternative complementary of the classical fundamentals of macroeconomics used by policymakers to develop more efficient policies.

Keywords: Permutation entropy; Statistical complexity; Complexity-entropy causality plane; Macrophysics policy (search for similar items in EconPapers)
Date: 2020
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Persistent link: https://EconPapers.repec.org/RePEc:eee:chsofr:v:137:y:2020:i:c:s096007792030309x

DOI: 10.1016/j.chaos.2020.109909

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