IDEAS home Printed from https://ideas.repec.org/a/taf/emetrv/v27y2008i4-6p329-362.html
   My bibliography  Save this article

Approximate Entropy as an Irregularity Measure for Financial Data

Author

Listed:
  • Steve Pincus

Abstract

The need to assess subtle, potentially exploitable changes in serial structure is paramount in the analysis of financial and econometric data. We demonstrate the utility of approximate entropy (ApEn), a model-independent measure of sequential irregularity, towards this goal, via several distinct applications, both empirical data and model-based. We also consider cross-ApEn, a related two-variable measure of asynchrony that provides a more robust and ubiquitous measure of bivariate correspondence than does correlation, and the resultant implications to diversification strategies. We provide analytic expressions for and statistical properties of ApEn, and compare ApEn to nonlinear (complexity) measures, correlation and spectral analyses, and other entropy measures.

Suggested Citation

  • Steve Pincus, 2008. "Approximate Entropy as an Irregularity Measure for Financial Data," Econometric Reviews, Taylor & Francis Journals, vol. 27(4-6), pages 329-362.
    • Handle: RePEc:taf:emetrv:v:27:y:2008:i:4-6:p:329-362
    DOI: 10.1080/07474930801959750
    as

    Download full text from publisher

    File URL: http://www.tandfonline.com/doi/abs/10.1080/07474930801959750
    Download Restriction: Access to full text is restricted to subscribers.
    File URL: https://libkey.io/10.1080/07474930801959750?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. David E. Allen & Michael McAleer & Robert Powell & Abhay K. Singh, 2013. "A Non-Parametric and Entropy Based Analysis of the Relationship between the VIX and S&P 500," JRFM, MDPI, vol. 6(1), pages 1-25, October.
    2. Darrol J. Stanley & Levan Efremidze & Jannie Rossouw, 2017. "Entropy Risk Factor Model of Exchange Rate Prediction," International Journal of Financial Research, International Journal of Financial Research, Sciedu Press, vol. 8(3), pages 51-56, July.
    3. Jadhao, Gaurav & Chandra, Abhijeet, 2017. "Application of VIX and entropy indicators for portfolio rotation strategies," Research in International Business and Finance, Elsevier, vol. 42(C), pages 1367-1371.
    4. David E Allen & Michael McAleer & Abhay K Singh, 2017. "An entropy-based analysis of the relationship between the DOW JONES Index and the TRNA Sentiment series," Applied Economics, Taylor & Francis Journals, vol. 49(7), pages 677-692, February.
    5. Muhammad Sheraz & Imran Nasir, 2021. "Information-Theoretic Measures and Modeling Stock Market Volatility: A Comparative Approach," Risks, MDPI, vol. 9(5), pages 1-20, May.
    6. Radhika Prosad Datta, 2023. "Regularity in forex returns during financial distress: Evidence from India," Papers 2308.04181, arXiv.org.
    7. Wine, Trevor, 2020. "A Matrix-Based Regularity Measure for Symbolic Sequences," OSF Preprints vpg8h, Center for Open Science.
    8. Stephan Schwill, 2018. "Entropy Analysis of Financial Time Series," Papers 1807.09423, arXiv.org.
    9. Ataei, Masoud & Chen, Shengyuan & Yang, Zijiang & Peyghami, M. Reza, 2021. "Theory and applications of financial chaos index," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 580(C).
    10. Efremidze, Levan & Stanley, Darrol J. & Kownatzki, Clemens, 2021. "Entropy trading strategies reveal inefficiencies in Japanese stock market," International Review of Economics & Finance, Elsevier, vol. 75(C), pages 464-477.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:taf:emetrv:v:27:y:2008:i:4-6:p:329-362. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: the person in charge (email available below). General contact details of provider: http://www.tandfonline.com/LECR20 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.