Estimating the algorithmic complexity ...
Document type :
Article dans une revue scientifique
DOI :
Title :
Estimating the algorithmic complexity of stock markets
Author(s) :
Brandouy, Olivier [Auteur]
Lille économie management - UMR 9221 [LEM]
Groupe de Recherche en Economie Théorique et Appliquée [GREThA]
Delahaye, Jean-Paul [Auteur]
Centre de Recherche en Informatique, Signal et Automatique de Lille - UMR 9189 [CRIStAL]
Systèmes Multi-Agents et Comportements [SMAC]
Ma, Lin [Auteur]
Laboratoire d'Informatique pour la Mécanique et les Sciences de l'Ingénieur [LIMSI]
Lille économie management - UMR 9221 [LEM]
Groupe de Recherche en Economie Théorique et Appliquée [GREThA]
Delahaye, Jean-Paul [Auteur]
Centre de Recherche en Informatique, Signal et Automatique de Lille - UMR 9189 [CRIStAL]
Systèmes Multi-Agents et Comportements [SMAC]
Ma, Lin [Auteur]
Laboratoire d'Informatique pour la Mécanique et les Sciences de l'Ingénieur [LIMSI]
Journal title :
Algorithmic Finance
Pages :
159 - 178
Publisher :
Philip Maymin University of Bridgeport
Publication date :
2015-12-29
ISSN :
2158-5571
English keyword(s) :
Kolmogorov complexity
compression
efficiency
return
compression
efficiency
return
HAL domain(s) :
Informatique [cs]/Système multi-agents [cs.MA]
Informatique [cs]/Modélisation et simulation
Informatique [cs]/Intelligence artificielle [cs.AI]
Informatique [cs]/Modélisation et simulation
Informatique [cs]/Intelligence artificielle [cs.AI]
English abstract : [en]
Randomness and regularities in finance are usually treated in probabilistic terms. In this paper, we develop a different approach in using a non-probabilistic framework based on the algorithmic information theory initially ...
Show more >Randomness and regularities in finance are usually treated in probabilistic terms. In this paper, we develop a different approach in using a non-probabilistic framework based on the algorithmic information theory initially developed by Kolmogorov (1965). We develop a generic method to estimate the Kolmogorov complexity of numeric series. This approach is based on an iterative "regularity erasing procedure" (REP) implemented to use lossless compression algorithms on financial data. The REP is found to be necessary to detect hidden structures, as one should "wash out" well-established financial patterns (i.e. stylized facts) to prevent algorithmic tools from concentrating on these non-profitable patterns. The main contribution of this article is methodological: we show that some structural regularities, invisible with classical statistical tests, can be detected by this algorithmic method. Our final illustration on the daily Dow-Jones Index reveals a weak compression rate, once well- known regularities are removed from the raw data. This result could be associated to a high efficiency level of the New York Stock Exchange, although more effective algorithmic tools could improve this compression rate on detecting new structures in the future.Show less >
Show more >Randomness and regularities in finance are usually treated in probabilistic terms. In this paper, we develop a different approach in using a non-probabilistic framework based on the algorithmic information theory initially developed by Kolmogorov (1965). We develop a generic method to estimate the Kolmogorov complexity of numeric series. This approach is based on an iterative "regularity erasing procedure" (REP) implemented to use lossless compression algorithms on financial data. The REP is found to be necessary to detect hidden structures, as one should "wash out" well-established financial patterns (i.e. stylized facts) to prevent algorithmic tools from concentrating on these non-profitable patterns. The main contribution of this article is methodological: we show that some structural regularities, invisible with classical statistical tests, can be detected by this algorithmic method. Our final illustration on the daily Dow-Jones Index reveals a weak compression rate, once well- known regularities are removed from the raw data. This result could be associated to a high efficiency level of the New York Stock Exchange, although more effective algorithmic tools could improve this compression rate on detecting new structures in the future.Show less >
Language :
Anglais
Peer reviewed article :
Oui
Audience :
Internationale
Popular science :
Non
Collections :
Source :
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- http://arxiv.org/pdf/1504.04296
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