Codifference as a practical tool to measure interdependence

DOI10.1016/J.PHYSA.2014.11.049MaRDI QIDQ1783336zbMATH OpenOpenAlexFDO

Authors Agnieszka Wyłomańska, Janusz Gajda, Igor M. Sokolov, Aleksei V. Chechkin

Publication date 20 September 2018

Published in Physica A (Search for Journal in Brave)

Full work available at URL https://arxiv.org/abs/1407.4239

zbMATH Keywords

characteristic functionestimationGaussian processreal data analysiscodifferenceprocess with infinite variance

Mathematics Subject Classification ID

Inference from stochastic processes and spectral analysis (62M15)

Abstract: Correlation and spectral analysis represent the standard tools to study interdependence in statistical data. However, for the stochastic processes with heavy-tailed distributions such that the variance diverges, these tools are inadequate. The heavy-tailed processes are ubiquitous in nature and finance. We here discuss codifference as a convenient measure to study statistical interdependence, and we aim to give a short introductory review of its properties. By taking different known stochastic processes as generic examples, we present explicit formulas for their codifferences. We show that for the Gaussian processes codifference is equivalent to covariance. For processes with finite variance these two measures behave similarly with time. For the processes with infinite variance the covariance does not exist, however, the codifference is relevant. We demonstrate the practical importance of the codifference by extracting this function from simulated as well as from real experimental data. We conclude that the codifference serves as a convenient practical tool to study interdependence for stochastic processes with both infinite and finite variances as well.

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