Modified cross sample entropy and surrogate data analysis method for financial time series

Yi Yin and Pengjian Shang

Physica A: Statistical Mechanics and its Applications, 2015, vol. 433, issue C, 17-25

Abstract: For researching multiscale behaviors from the angle of entropy, we propose a modified cross sample entropy (MCSE) and combine surrogate data analysis with it in order to compute entropy differences between original dynamics and surrogate series (MCSDiff). MCSDiff is applied to simulated signals to show accuracy and then employed to US and Chinese stock markets. We illustrate the presence of multiscale behavior in the MCSDiff results and reveal that there are synchrony containing in the original financial time series and they have some intrinsic relations, which are destroyed by surrogate data analysis. Furthermore, the multifractal behaviors of cross-correlations between these financial time series are investigated by multifractal detrended cross-correlation analysis (MF-DCCA) method, since multifractal analysis is a multiscale analysis. We explore the multifractal properties of cross-correlation between these US and Chinese markets and show the distinctiveness of NQCI and HSI among the markets in their own region. It can be concluded that the weaker cross-correlation between US markets gives the evidence for the better inner mechanism in the US stock markets than that of Chinese stock markets. To study the multiscale features and properties of financial time series can provide valuable information for understanding the inner mechanism of financial markets.

Keywords: Modified cross-sample entropy (MCSE); Surrogate data analysis; Multifractal detrended cross-correlation analysis (MF-DCCA); Financial time series (search for similar items in EconPapers)
Date: 2015
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Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:phsmap:v:433:y:2015:i:c:p:17-25

DOI: 10.1016/j.physa.2015.03.055

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