The lack of reversibility during financial crisis and its identification

Abstract

The focus of this study to measure the varying irreversibility of stock markets. A fundamental idea of this study is that financial systems are complex and nonlinear systems that are presented to be non-Gaussian fractal and chaotic. Their complexity and different aspects of nonlinear properties, such as time irreversibility, vary over time and for a long-range of scales. Therefore, our work presents approaches to measure the complexity and irreversibility of the time series. To the presented methods we include Guzik’s index, Porta’s index, Costa’s index, based on complex networks measures, Multiscale time irreversibility index and based on permutation patterns measures. Our study presents that the corresponding measures can be used as indicators or indicator-precursors of crisis states in stock markets.

Recurrence quantification analysis of energy market crises: a nonlinear approach to risk management

“…We have performed RQA under sliding window procedure for standardized returns and standardized initial time series [33,34,35,36,37,38]. We have found that standardized initial time series better expresses internal complexity and recurrent properties of the energy market indices.…”

Advances in machine learning for the innovation economy: in the shadow of war

“…The paper "High-order network analysis for financial crash identification" by Andrii O. Bielinskyi, Vladimir N. Soloviev, Serhii V. Hushko, Arnold E. Kiv, and Andriy V. Matviychuk [46] proposes to use high-order networks to study the temporal evolution of the Dow Jones Industrial Average (DJIA) index. The paper begins by discussing the importance of network analysis for understanding the complexity and dynamics of socio-economic systems.…”

Complex systems and physics education

“…It is worth noting that there are also various algorithms for converting a time series to a graph. We would like to emphasize the visibility graph algorithms [14,17,55,64,93] (figure 5) and one based on recurrence analysis [35] (figure 6).…”

“…Over the past decade, various methods have been proposed for calculating the degree of irreversibility in systems [26,30,34,41,54,59,65,105] and we have presented how to use some of them for crises identification [14]. For pedagogical purposes, along with the mentioned concept of multifractality and entropy, we would like to present irreversibility based on the multifractal approach [54] and permutation patterns [105].…”