Emerging properties of financial time series in the “Game of Life”

We explore the spatial complexity of Conway’s “Game of Life,” a prototypical cellular automaton by means of a geometrical procedure generating a two-dimensional random walk from a bidimensional lattice with periodical boundaries. The one-dimensional projection of this process is analyzed and it turns out that some of its statistical properties resemble the so-called stylized facts observed in financial time series. The scope and meaning of this result are discussed from the viewpoint of complex systems. In particular, we stress how the supposed peculiarities of financial time series are, often, overrated in their importance

Type I and Type II Fractional Brownian Motions: a Reconsideration

The so-called type I and type II fractional Brownian motions are limit distributions associated with the fractional integration model in which pre-sample shocks are either included in the lag structure, or suppressed. There can be substantial differences between the distributions of these two processes and of functionals derived from them, so that it becomes an important issue to decide which model to use as a basis for inference. Alternative methods for simulating the type I case are contrasted, and for models close to the nonstationarity boundary, truncating infinite sums is shown to result in a significant distortion of the distribution. A simple simulation method that overcomes this problem is described and implemented. The approach also has implications for the estimation of type I ARFIMA models, and a new conditional ML estimator is proposed, using the annual Nile minima series for illustration.Fractional Brownian motion, long memory, ARFIMA, simulation.

Simulating the binary variates for the components of a socio - economical system

Often in practice the components Wj of a sociological or an economical system W take discrete 0-1 values. We talk about how to generate arbitrary observations from a binary 0-1 system B when is known the multidimensional distribution of the discrete random vector B. We also simulated a simplified structure of B given by the marginal distributions together with the matrix of the correlation coefficients. Different properties of the systems W are presented too

Stochastic cosmic ray sources and the TeV break in the all-electron spectrum

Despite significant progress over more than 100 years, no accelerator has been unambiguously identified as the source of the locally measured flux of cosmic rays. High-energy electrons and positrons are of particular importance in the search for nearby sources as radiative energy losses constrain their propagation to distances of about 1 kpc around 1 TeV. At the highest energies, the spectrum is therefore dominated and shaped by only a few sources whose properties can be inferred from the fine structure of the spectrum at energies currently accessed by experiments like AMS-02, CALET, DAMPE, Fermi-LAT, H.E.S.S. and ISS-CREAM. We present a stochastic model of the Galactic all-electron flux and evaluate its compatibility with the measurement recently presented by the H.E.S.S. collaboration. To this end, we have MC generated a large sample of the all-electron flux from an ensemble of random distributions of sources. We confirm the non-Gaussian nature of the probability density of fluxes at individual energies previously reported in analytical computations. For the first time, we also consider the correlations between the fluxes at different energies, treating the binned spectrum as a random vector and parametrising its joint distribution with the help of a pair-copula construction. We show that the spectral break observed in the all-electron spectrum by H.E.S.S. and DAMPE is statistically compatible with a distribution of astrophysical sources like supernova remnants or pulsars, but requires a rate smaller than the canonical supernova rate. This important result provides an astrophysical interpretation of the spectrum at TeV energies and allows differentiating astrophysical source models from exotic explanations, like dark matter annihilation. We also critically assess the reliability of using catalogues of known sources to model the electron-positron flux.Comment: 30 pages, 12 figures; extended discussion; accepted for publication in JCA

ON THE SMALL SAMPLE PROPERTIES OF DICKEY FULLER AND MAXIMUM LIKELIHOOD UNIT ROOT TESTS ON DISCRETE-SAMPLED SHORT-TERM INTEREST RATES

Testing for unit roots in short-term interest rates plays a key role in the empirical modelling of these series. It is widely assumed that the volatility of interest rates follows some time-varying function which is dependent of the level of the series. This may cause distortions in the performance of conventional tests for unit root nonstationarity since these are typically derived under the assumption of homoskedasticity. Given the relative unfamiliarity on the issue, we conducted an extensive Monte Carlo investigation in order to assess the performance of the DF unit root tests, and examined the effects on the limiting distributions of test procedures (t- and likelihood ratio tests) based on maximum likelihood estimation of models for short-term rates with a linear drift.Unit root, interest rates, CKLS model.