Multifractal diffusion entropy analysis: optimal bin width of probability histograms

DOI10.1016/J.PHYSA.2014.07.008zbMATH Open1395.62271arXiv1401.3316OpenAlexW2117554772MaRDI QIDQ1783077FDOQ1783077

Authors: Petr Jizba, Jan Korbel 

Publication date: 20 September 2018

Published in: Physica A (Search for Journal in Brave)

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.

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

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zbMATH Keywords

time seriesstable distributionsmultifractals[https://portal.mardi4nfdi.de/w/index.php?title=+Special%3ASearch&search=R%EF%BF%BD%EF%BF%BDnyi+entropy&go=Go R��nyi 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)

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Cited In (10)

• Thermodynamics of exponential Kolmogorov-Nagumo averages
• Differential entropy estimation with a Paretian kernel: tail heaviness and smoothing
• On statistical properties of Jizba-Arimitsu hybrid entropy
• 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

Uses Software

• Multifractal

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