Multifractal diffusion entropy analysis: optimal bin width of probability histograms

DOI10.1016/J.PHYSA.2014.07.008MaRDI QIDQ1783077zbMATH OpenOpenAlexFDO

Authors Petr Jizba, Jan Korbel

Publication date 20 September 2018

Published in Physica A (Search for Journal in Brave)

Full work available at URL https://arxiv.org/abs/1401.3316

zbMATH Keywords

time seriesstable distributionsmultifractalsRényi entropy

Mathematics Subject Classification ID

Infinitely divisible distributions; stable distributions (60E07) Time series, auto-correlation, regression, etc. in statistics (GARCH) (62M10) Applications of statistics to actuarial sciences and financial mathematics (62P05)

Abstract: In the framework of Multifractal Diffusion Entropy Analysis we propose a method for choosing an optimal bin-width in histograms generated from underlying probability distributions of interest. The method presented uses techniques of R'{e}nyi's entropy and the mean squared error analysis to discuss the conditions under which the error in the multifractal spectrum estimation is minimal. We illustrate the utility of our approach by focusing on a scaling behavior of financial time series. In particular, we analyze the S&P500 stock index as sampled at a daily rate in the time period 1950-2013. In order to demonstrate a strength of the method proposed we compare the multifractal $delta$-spectrum for various bin-widths and show the robustness of the method, especially for large values of $q$. For such values, other methods in use, e.g., those based on moment estimation, tend to fail for heavy-tailed data or data with long correlations. Connection between the $delta$-spectrum and R'{e}nyi's $q$ parameter is also discussed and elucidated on a simple example of multiscale time series.

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Cited in

(10)

• Thermodynamics of exponential Kolmogorov-Nagumo averages
• On statistical properties of Jizba-Arimitsu hybrid entropy
• Differential entropy estimation with a Paretian kernel: tail heaviness and smoothing
• Role of information theoretic uncertainty relations in quantum theory
• Techniques for multifractal spectrum estimation in financial time series
• Information content of liquidity and volatility measures
• On q-non-extensive statistics with non-Tsallisian entropy
• Rescaling the nonadditivity parameter in Tsallis thermostatistics
• Modeling of financial processes with a space-time fractional diffusion equation of varying order
• On the dynamical foundation of multifractality

Describes a project that uses

Uses Software

• Multifractal

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