Short-term Kullback–Leibler divergence analysis to extract unstable periods in financial time series

Ryuji Ishizaki () and Masayoshi Inoue
Additional contact information
Ryuji Ishizaki: Fukuoka Prefectural University
Masayoshi Inoue: Professor Emeritus of Kagoshima University

Evolutionary and Institutional Economics Review, 2024, vol. 21, issue 2, No 6, 227-236

Abstract: Abstract A new method is presented for estimating a short-term Kullback-Leibler divergence to analyze the statistical characteristics of significant fluctuations in financial time series. The short-term Kullback–Leibler divergence is derived by transforming variations in financial time series into binary symbolic dynamics. This method quantifies the extent to which the occurrence of significant fluctuations deviates from independent Bernoulli trials in short-term financial time series. The study presents the calculation results of short-term Kullback–Leibler divergence for the USD/JPY exchange rate and the Nikkei 225 Index. The proposed technique serves as a valuable tool for analyzing and characterizing rapid changes in financial dynamics, with potential applications in advancing the analysis of financial market behaviors and trends. Its applications extend to risk assessment and decision-making processes.

Keywords: Kullback–Leibler divergence; Financial time series; Binary symbolic dynamics; 91B84; 91B82; 91B70 (search for similar items in EconPapers)
JEL-codes: C10 F30 G00 (search for similar items in EconPapers)
Date: 2024
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
http://link.springer.com/10.1007/s40844-024-00284-0 Abstract (text/html)
Access to the full text of the articles in this series is restricted.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:spr:eaiere:v:21:y:2024:i:2:d:10.1007_s40844-024-00284-0

Ordering information: This journal article can be ordered from
https://www.springer ... theory/journal/40844

DOI: 10.1007/s40844-024-00284-0

Access Statistics for this article

Evolutionary and Institutional Economics Review is currently edited by Kiichiro Yagi, Yuji Aruka and Takahiro Fujimoto

More articles in Evolutionary and Institutional Economics Review from Springer
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().