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A financial indicator for mid-term tendencies

Author

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  • Leonel Caetano, Marco Antonio
  • Yoneyama, Takashi

Abstract

This work proposes an heuristic indicator for mid-term tendencies of stock prices based on non-linear dynamic equations combined with a graphical method inspired on cell morphology analysis. The model consists of ordinary differential equations with parameters that are fitted by means of the actual data history of stock prices using Extended Kalman Filter. The model structures are to be chosen so as to adequately represent the specific microeconomic condition, such as oligopoly with leader and follower, economic clusters, firms producing complementary products and others. The equations are solved numerically and the trajectories in the phase plane are associated with cell membranes. In an analogy with the increase in the cell volume when its internal pressure rises, the new financial indicator expresses the increase of the stress in a stock market by means of expanding phase portraits.

Suggested Citation

  • Leonel Caetano, Marco Antonio & Yoneyama, Takashi, 2007. "A financial indicator for mid-term tendencies," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 385(2), pages 609-620.
    • Handle: RePEc:eee:phsmap:v:385:y:2007:i:2:p:609-620
    DOI: 10.1016/j.physa.2007.05.026
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    Cited by:

    1. Caetano, Marco Antonio Leonel & Yoneyama, Takashi, 2011. "A model for the evaluation of systemic risk in stock markets," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 390(12), pages 2368-2374.

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