ARISE: ApeRIodic SEmi-parametric Process for Efficient Markets without Periodogram and Gaussianity Assumptions

• URL: http://arxiv.org/abs/2111.06222v1
• Date: Mon, 8 Nov 2021 03:36:06 GMT
• Title: ARISE: ApeRIodic SEmi-parametric Process for Efficient Markets without Periodogram and Gaussianity Assumptions
• Authors: Shao-Qun Zhang, Zhi-Hua Zhou
• Abstract summary: We present the ApeRI-miodic (ARISE) process for investigating efficient markets. The ARISE process is formulated as an infinite-sum of some known processes and employs the aperiodic spectrum estimation. In practice, we apply the ARISE function to identify the efficiency of real-world markets.
• Score: 91.3755431537592
• License: http://arxiv.org/licenses/nonexclusive-distrib/1.0/
• Abstract: Mimicking and learning the long-term memory of efficient markets is a fundamental problem in the interaction between machine learning and financial economics to sequential data. Despite the prominence of this issue, current treatments either remain largely limited to heuristic techniques or rely significantly on periodogram or Gaussianty assumptions. In this paper, we present the ApeRIodic SEmi-parametric (ARISE) process for investigating efficient markets. The ARISE process is formulated as an infinite-sum function of some known processes and employs the aperiodic spectrum estimation to determine the key hyper-parameters, thus possessing the power and potential of modeling the price data with long-term memory, non-stationarity, and aperiodic spectrum. We further theoretically show that the ARISE process has the mean-square convergence, consistency, and asymptotic normality without periodogram and Gaussianity assumptions. In practice, we apply the ARISE process to identify the efficiency of real-world markets. Besides, we also provide two alternative ARISE applications: studying the long-term memorability of various machine-learning models and developing a latent state-space model for inference and forecasting of time series. The numerical experiments confirm the superiority of our proposed approaches.

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