Local Lyapunov exponents: Zero plays no role in Forecasting chaotic systems

Dominique Guégan and Justin Leroux

No 08-10, Cahiers de recherche from HEC Montréal, Institut d'économie appliquée

Abstract: We propose a novel methodology for forecasting chaotic systems which uses information on local Lyapunov exponents (LLEs) to improve upon existing predictors by correcting for their inevitable bias. Using simulated data on the nearest-neighbor predictor, we show that accuracy gains can be substantial and that the candidate selection problem identified in Guégan and Leroux (2009) can be solved irrespective of the value of LLEs. An important corollary follows: the focal value of zero, which traditionally distinguishes order from chaos, plays no role whatsoever when forecasting deterministic systems.

Keywords: Chaos theory; Lyapunov exponent; Lorenz attractor Rössler attractor; Monte Carlo Simulations. (search for similar items in EconPapers)
JEL-codes: C15 C22 C53 C65 (search for similar items in EconPapers)
Pages: 16 pages
Date: 2008-09
New Economics Papers: this item is included in nep-ecm and nep-for
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