Wavelet Entropy Based Analysis and Forecasting of Crude Oil Price Dynamics

Information diffusion within financial markets plays a crucial role in the process of price formation and the propagation of sentiment and risk. We perform a comparative analysis of information transfer between industry sectors of the Chinese and the USA stock markets, using daily sector indices for the period from 2000 to 2017. The information flow from one sector to another is measured by the transfer entropy of the daily returns of the two sector indices. We find that the most active sector in information exchange (i.e., the largest total information inflow and outflow) is the non-bank financial sector in the Chinese market and the technology sector in the USA market. This is consistent with the role of the non-bank sector in corporate financing in China and the impact of technological innovation in the USA. In each market, the most active sector is also the largest information sink that has the largest information inflow (i.e., inflow minus outflow). In contrast, we identify that the main information source is the bank sector in the Chinese market and the energy sector in the USA market. In the case of China, this is due to the importance of net bank lending as a signal of corporate activity and the role of energy pricing in affecting corporate profitability. There are sectors such as the real estate sector that could be an information sink in one market but an information source in the other, showing the complex behavior of different markets. Overall, these findings show that stock markets are more synchronized, or ordered, during periods of turmoil than during periods of stability.

and the average asymmetric information flow

Section: Discussionmentioning

confidence: 68%

Information Transfer between Stock Market Sectors: A Comparison between the USA and China

Yue

Fan

Batten

et al. 2020

“…Expanding δ i t T and ω j t T in wavelet series, we obtain Equation (13). These empirical wavelet coefficients can be estimated using a Daubechies filter as in [17] and identifying the best resolution level using skill comparison metrics as: root mean squared error (RMSE) and mean absolute error (MAE), as applied in this document, but other metrics can be implemented as in [21], where a new wavelet entropy based approach was proposed to identify the optimal model specification and construct the effective wavelet entropy based forecasting models.…”

Section: Estimators Of Time Varying Coefficientsmentioning

confidence: 99%

“…The same procedure was performed for all fitted models. The wavelet entropy algorithm such as the one presented in [21] could be used in the future, to determine the optimal wavelet families and the decomposition scale that would produce an improved forecasting performance. Table 3 presents a summary of the models obtained, with their indicators of the goodness of fit and forecast.…”

Section: Wavelet Transfer Function Modelsmentioning

confidence: 99%

Polynomial and Wavelet-Type Transfer Function Models to Improve Fisheries’ Landing Forecasting with Exogenous Variables

Vivas

Allende‐Cid

Salas

et al. 2019

It is well known that environmental fluctuations and fishing efforts modify fishing patterns in various parts of the world. One of the most affected areas is northern Chile. The reduction of the gaps in the implementation of national fisheries’ management policies and the basic knowledge that supports the making of such decisions are crucial. That is why in this research, a transfer function method with variable coefficients is proposed to forecast monthly disembarkation of anchovies and sardines in northern Chile, taking into account the incidence of large-scale climatic variables on landings. The method uses a least squares procedure and wavelets to expand the coefficients of the transfer function. Linear estimators of the time varying coefficients are proposed, followed by a truncation of the wavelet expansion up to an appropriate scale. Finally, the estimators for the transfer function coefficients are obtained by using the inverse wavelet transformation. Research results suggest that the transfer function models with variable coefficients fit the behavior of the anchovies’ landing with great accuracy, while the use of transfer function models with constant coefficients fits sardines’ landings better. Both fisheries’ landings could be explained to a large extent from the large scale climatic variables.

“…Considering that large consumers needed to decide their energy procurement strategy, Gao et al [34] developed an electric energy procurement decision-making model and analyzed the entropy characteristic of the model. Zou et al [35] proposed new effective wavelet entropy to analyze crude oil price dynamics. In this paper, considering that consumers have heterogeneity and risk aversion for probabilistic products, our primary aim is to develop a non-cooperative dynamic price Stackelberg game model considering probabilistic selling under an asymmetric dual-channel structure.…”

Section: Introductionmentioning

confidence: 99%

The Entropy Complexity of an Asymmetric Dual-Channel Supply Chain with Probabilistic Selling

Huang

2018

Considering consumers’ attitudes to risks for probabilistic products and probabilistic selling, this paper develops a dynamic Stackelberg game model of the supply chain considering the asymmetric dual-channel structure. Based on entropy theory and dynamic theory, we analyze and simulate the influences of decision variables and parameters on the stability and entropy of asymmetric dual-channel supply chain systems using bifurcation, entropy diagram, the parameter plot basin, attractor, etc. The results show that decision variables and parameters have great impacts on the stability of asymmetric dual-channel supply chains; the supply chain system will enter chaos through flip bifurcation or Neimark–Sacker bifurcation with the increase of the system entropy, and thus the system is more complex and falls into a chaotic state, with its entropy increased. The stability of the system can become robust with the increase of the probability that product a becomes a probabilistic product, and it weakens with the increase of the risk preference of customers for probabilistic products and the relative bargaining power of the retailer. A manufacturer using the direct selling channel may obtain greater profit than one using traditional selling channels. Using the method of parameter adjustment and feedback control, the entropy of the supply chain system will decline, and the supply chain system will fall into a stable state. Therefore, in the actual market of probabilistic selling, the manufacturers and retailers should pay attention to the parameters and adjustment speed of prices and ensure the stability of the game process and the orderliness of the dual-channel supply chain.