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Time-series analysis of multiple foreign exchange rates using time-dependent pattern entropy

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  • Ishizaki, Ryuji
  • Inoue, Masayoshi

Abstract

Time-dependent pattern entropy is a method that reduces variations to binary symbolic dynamics and considers the pattern of symbols in a sliding temporal window. We use this method to analyze the instability of daily variations in multiple foreign exchange rates. The time-dependent pattern entropy of 7 foreign exchange rates (AUD/USD, CAD/USD, CHF/USD, EUR/USD, GBP/USD, JPY/USD, and NZD/USD) was found to be high in the long period after the Lehman shock, and be low in the long period after Mar 2012. We compared the correlation matrix between exchange rates in periods of high and low of the time-dependent pattern entropy.

Suggested Citation

  • Ishizaki, Ryuji & Inoue, Masayoshi, 2018. "Time-series analysis of multiple foreign exchange rates using time-dependent pattern entropy," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 490(C), pages 967-974.
    • Handle: RePEc:eee:phsmap:v:490:y:2018:i:c:p:967-974
    DOI: 10.1016/j.physa.2017.08.144
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    Cited by:

    1. Zavala-Díaz, J.C. & Pérez-Ortega, J. & Hernández-Aguilar, J.A. & Almanza-Ortega, N.N. & Martínez-Rebollar, A., 2020. "Short-term prediction of the closing price of financial series using a ϵ-machine model," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 545(C).
    2. Kamlesh Kumar Raghuvanshi & Arun Agarwal & Amit Kumar Singh & Khushboo Jain, 2023. "Time-dependent entropic analysis of software bugs," International Journal of System Assurance Engineering and Management, Springer;The Society for Reliability, Engineering Quality and Operations Management (SREQOM),India, and Division of Operation and Maintenance, Lulea University of Technology, Sweden, vol. 14(5), pages 1718-1725, October.

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