Algorithmic complexity of real financial markets

R. Mansilla

Physica A: Statistical Mechanics and its Applications, 2001, vol. 301, issue 1, 483-492

Abstract: A new approach to the understanding of complex behavior of financial markets index using tools from thermodynamics and statistical physics is developed. Physical complexity, a quantity rooted in the Kolmogorov–Chaitin theory is applied to binary sequences built up from real time series of financial markets indexes. The study is based on NASDAQ and Mexican IPC data. Different behaviors of this quantity are shown when applied to the intervals of series placed before crashes and to intervals when no financial turbulence is observed. The connection between our results and the efficient market hypothesis is discussed.

Keywords: Financial markets; physical complexity; Kolmogorov–Chaitin theory (search for similar items in EconPapers)
Date: 2001
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Citations: View citations in EconPapers (7)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:phsmap:v:301:y:2001:i:1:p:483-492

DOI: 10.1016/S0378-4371(01)00434-4

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