Related papers: Predicting the State of Synchronization of Financial Time Series using Cross Recurrence Plots

Predicting the State of Synchronization of Financial Time Series using Cross Recurrence Plots

URL: http://arxiv.org/abs/2210.14605v1
Date: Wed, 26 Oct 2022 10:22:28 GMT
Title: Predicting the State of Synchronization of Financial Time Series using Cross Recurrence Plots
Authors: Mostafa Shabani, Martin Magris, George Tzagkarakis, Juho Kanniainen, Alexandros Iosifidis
Abstract summary: This study introduces a new method for predicting the future state of synchronization of the dynamics of two financial time series. We adopt a deep learning framework for methodologically addressing the prediction of the synchronization state. We find that the task of predicting the state of synchronization of two time series is in general rather difficult, but for certain pairs of stocks attainable with very satisfactory performance.
Score: 75.20174445166997
License: http://creativecommons.org/licenses/by/4.0/
Abstract: Cross-correlation analysis is a powerful tool for understanding the mutual dynamics of time series. This study introduces a new method for predicting the future state of synchronization of the dynamics of two financial time series. To this end, we use the cross-recurrence plot analysis as a nonlinear method for quantifying the multidimensional coupling in the time domain of two time series and for determining their state of synchronization. We adopt a deep learning framework for methodologically addressing the prediction of the synchronization state based on features extracted from dynamically sub-sampled cross-recurrence plots. We provide extensive experiments on several stocks, major constituents of the S\&P100 index, to empirically validate our approach. We find that the task of predicting the state of synchronization of two time series is in general rather difficult, but for certain pairs of stocks attainable with very satisfactory performance.