The predictive power of singular value decomposition entropy for stock market dynamics
نویسنده
چکیده
We use a correlation-based approach to analyze financial data from the US stock market, both daily and monthly observations from the Dow Jones. We compute the entropy based on the singular value decomposition of the correlation matrix for the components of the Dow Jones Industrial Index. Based on a moving window, we derive time varying measures of entropy for both daily andmonthly data.We find that the entropy has a predictive ability with respect to stock market dynamics as indicated by the Granger causality tests. © 2013 Elsevier B.V. All rights reserved.
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