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Predicting the state of synchronization of financial time series using cross recurrence plots

Author

Listed:
  • M. Shabani
  • M. Magris
  • George Tzagkarakis

    (IRGO - Institut de Recherche en Gestion des Organisations - UB - Université de Bordeaux - Institut d'Administration des Entreprises (IAE) - Bordeaux)

  • J. Kanniainen
  • A. Iosifidis

Abstract

Cross-correlation analysis is a powerful tool for understanding the mutual dynamics of time series. This study introduces a new method for predicting the future state of synchronization of the dynamics of two financial time series. To this end, we use the cross recurrence plot analysis as a nonlinear method for quantifying the multidimensional coupling in the time domain of two time series and for determining their state of synchronization. We adopt a deep learning framework for methodologically addressing the prediction of the synchronization state based on features extracted from dynamically sub-sampled cross recurrence plots. We provide extensive experiments on several stocks, major constituents of the S &P100 index, to empirically validate our approach. We find that the task of predicting the state of synchronization of two time series is in general rather difficult, but for certain pairs of stocks attainable with very satisfactory performance (84% F1-score, on average). © 2023, The Author(s).

Suggested Citation

  • M. Shabani & M. Magris & George Tzagkarakis & J. Kanniainen & A. Iosifidis, 2023. "Predicting the state of synchronization of financial time series using cross recurrence plots," Post-Print hal-04415269, HAL.
    • Handle: RePEc:hal:journl:hal-04415269
    DOI: 10.1007/s00521-023-08674-y
    Note: View the original document on HAL open archive server: https://hal.science/hal-04415269
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    References listed on IDEAS

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    1. Sanjay Sathish & Charu C Sharma, 2024. "Leveraging RNNs and LSTMs for Synchronization Analysis in the Indian Stock Market: A Threshold-Based Classification Approach," Papers 2409.06728, arXiv.org.

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    More about this item

    Keywords

    Cross recurrence plot; Synchronization; Kernel convolutional neural network; Financial time series;
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