Information measure for financial time series: quantifying short-term market heterogeneity

A well-interpretable measure of information has been recently proposed based on a partition obtained by intersecting a random sequence with its moving average. The partition yields disjoint sets of the sequence, which are then ranked according to their size to form a probability distribution function and finally fed in the expression of the Shannon entropy. In this work, such entropy measure is implemented on the time series of prices and volatilities of six financial markets. The analysis has been performed, on tick-by-tick data sampled every minute for six years of data from 1999 to 2004, for a broad range of moving average windows and volatility horizons. The study shows that the entropy of the volatility series depends on the individual market, while the entropy of the price series is practically a market-invariant for the six markets. Finally, a cumulative information measure - the `Market Heterogeneity Index'- is derived from the integral of the proposed entropy measure. The values of the Market Heterogeneity Index are discussed as possible tools for optimal portfolio construction and compared with those obtained by using the Sharpe ratio a traditional risk diversity measure

Long-Range Dependence in Financial Markets: a Moving Average Cluster Entropy Approach

A perspective is taken on the intangible complexity of economic and social systems by investigating the underlying dynamical processes that produce, store and transmit information in financial time series in terms of the \textit{moving average cluster entropy}. An extensive analysis has evidenced market and horizon dependence of the \textit{moving average cluster entropy} in real world financial assets. The origin of the behavior is scrutinized by applying the \textit{moving average cluster entropy} approach to long-range correlated stochastic processes as the Autoregressive Fractionally Integrated Moving Average (ARFIMA) and Fractional Brownian motion (FBM). To that end, an extensive set of series is generated with a broad range of values of the Hurst exponent $H$ and of the autoregressive, differencing and moving average parameters $p,d,q$. A systematic relation between \textit{moving average cluster entropy}, \textit{Market Dynamic Index} and long-range correlation parameters $H$, $d$ is observed. This study shows that the characteristic behaviour exhibited by the horizon dependence of the cluster entropy is related to long-range positive correlation in financial markets. Specifically, long range positively correlated ARFIMA processes with differencing parameter $d\simeq 0.05$, $d\simeq 0.15$ and $d\simeq 0.25$ are consistent with \textit{moving average cluster entropy} results obtained in time series of DJIA, S\&P500 and NASDAQ

Array of Josephson junctions with a non-sinusoidal current-phase relation as a model of the resistive transition of unconventional superconductors

An array of resistively and capacitively shunted Josephson junctions with nonsinusoidal current-phase relation is considered for modelling the transition in high-T$_c$ superconductors. The emergence of higher harmonics, besides the simple sinusoid $I_{c}\sin\phi$, is expected for dominant \emph{d}-wave symmetry of the Cooper pairs, random distribution of potential drops, dirty grains, or nonstationary conditions. We show that additional cosine and sine terms act respectively by modulating the global resistance and by changing the Josephson coupling of the mixed superconductive-normal states. First, the approach is applied to simulate the transition in disordered granular superconductors with the weak-links characterized by nonsinusoidal current-phase relation. In granular superconductors, the emergence of higher-order harmonics affects the slope of the transition. Then, arrays of intrinsic Josephson junctions, naturally formed by the CuO$_2$ planes in cuprates, are considered. The critical temperature suppression, observed at values of hole doping close to $p=1/8$, is investigated. Such suppression, related to the sign change and modulation of the Josephson coupling across the array, is quantified in terms of the intensities of the first and second sinusoids of the current-phase relation. Applications are envisaged for the design and control of quantum devices based on stacks of intrinsic Josephson junctions.Comment: Added: comparison with experiments; reference

Superconducting-insulator transition in disordered Josephson junctions networks

The superconducting-insulator transition is simulated in disordered networks of Josephson junctions with thermally activated Arrhenius-like resistive shunt. By solving the conductance matrix of the network, the transition is reproduced in different experimental conditions by tuning thickness, charge density and disorder degree. In particular, on increasing fluctuations of the parameters entering the Josephson coupling and the Coulomb energy of the junctions, the transition occurs for decreasing values of the critical temperature T c and increasing values of the activation temperature T o . The results of the simulation compare well with recent experiments where the mesoscopic fluctuations of the phase have been suggested as the mechanism underlying the phenomenon of emergent granularityin otherwise homogeneous films. The proposed approach is compared with the results obtained on TiN films and nanopatterned arrays of weak-links, where the superconductor-insulator transition is directly stimulate

Static and dynamic factors in an information-based multi-asset artificial stock market

3noAn information-based multi-asset artificial stock market characterized by different types of stocks and populated by heterogeneous agents is presented. In the market, agents trade risky assets in exchange for cash. Beside the amount of cash and of stocks owned, each agent is characterized by sentiments and agents share their sentiments by means of interactions that are determined by sparsely connected networks. A central market maker (clearing house mechanism) determines the price processes for each stock at the intersection of the demand and the supply curves. Single stock price processes exhibit volatility clustering and fat-tailed distribution of returns whereas multivariate price process exhibits both static and dynamic stylized facts, i.e., the presence of static factors and common trends. Static factors are studied making reference to the cross-correlation of returns of different stocks. The common trends are investigated considering the variance–covariance matrix of prices. Results point out that the probability distribution of eigenvalues of the cross-correlation matrix of returns shows the presence of sectors, similar to those observed on real empirical data. As regarding the dynamic factors, the variance–covariance matrix of prices point out a limited number of assets prices series that are independent integrated processes, in close agreement with the empirical evidence of asset price time series of real stock markets. These results remarks the crucial dependence of statistical properties of multi-assets stock market on the agents’ interaction structure.partially_openopenPonta, Linda*; Pastore, Stefano; Cincotti, SilvanoPonta, Linda; Pastore, Stefano; Cincotti, Silvan

Monetary Incentives in Italian Public Administration: A Stimulus for Employees? An Agent-Based Approach

The paper, focusing on the context of Public Administration (PA), addresses the effects of monetary incentives in employees' performance. In the Italian PA, the monetary incentives are distributed according to the D.L.150/09 (i.e., the monetary incentives are divided among the employees according to the employees' performance) which is based on the rank order tournament. The paper investigates if this mechanism has positive and sustainable impacts on the employees' performance in the short, middle, and long term. The employees' performance has been modeled as a function of ability and motivation. The results of the computational experiments show a positive impact of the monetary incentives, distributed according to merit criteria, on the employees' performance in the short, middle, and long term

The Size Variance Relationship of Business Firm Growth Rates.

The relationship between the size and the variance of firm growth rates is known to follow an approximate power-law behavior σ(S) similar to S^-β(S) where S is the firm size and β(S) almost equal to 0.2 is an exponent weakly dependent on S. Here we show how a model of proportional growth which treats firms as classes composed of various number of units of variable size, can explain this size-variance dependence. In general, the model predicts that β(S) must exhibit a crossover from β(0) = 0 to β(∞) = 1/2. For a realistic set of parameters, β(S) is approximately constant and can vary in the range from 0.14 to 0.2 depending on the average number of units in the firm. We test the model with a unique industry specific database in which firm sales are given in terms of the sum of the sales of all their products. We find that the model is consistent with the empirically observed size-variance relationship.patent disclosure; innovation; r&d competition

The Size Variance Relationship of Business Firm Growth Rates.

The relationship between the size and the variance of firm growth rates is known to follow an approximate power-law behavior σ(S) similar to S^-β(S) where S is the firm size and β(S) almost equal to 0.2 is an exponent weakly dependent on S. Here we show how a model of proportional growth which treats firms as classes composed of various number of units of variable size, can explain this size-variance dependence. In general, the model predicts that β(S) must exhibit a crossover from β(0) = 0 to β(∞) = 1/2. For a realistic set of parameters, β(S) is approximately constant and can vary in the range from 0.14 to 0.2 depending on the average number of units in the firm. We test the model with a unique industry specific database in which firm sales are given in terms of the sum of the sales of all their products. We find that the model is consistent with the empirically observed size-variance relationship.

Resistive transition in granular disordered high Tc superconductors: a numerical study

The resistive transition of granular high-Tc superconductors, characterized by either weak (YBCO-like) or strong (MgB2-like) links, occurs through a series of avalanche-type current-density rearrangements. These rearrangements correspond to the creation of resistive layers, crossing the whole specimen approximately orthogonal to the current-density direction, due to the simultaneous transition of a large number of weak links or grains. The present work shows that exact solution of the Kirchhoff equations for strongly and weakly linked networks of nonlinear resistors, with Josephson-junction characteristics, yield the subsequent formation of resistive layers within the superconductive matrix as temperature increases. Furthermore, the voltage noise observed at the transition is related to the resistive layer formation process. The noise intensity is estimated from the superposition of voltage drop elementary events related to the subsequent resistive layers. At the end of the transition, the layers mix up, the step amplitude decreases, and the resistance curve smooths. This results in the suppression of noise, as experimentally found. Remarkably, a scaling law for the noise intensity with the network size is argued. It allows us to extend the results to networks with arbitrary size and, thus, to real specimen

Budgetary rigour with stimulus in lean times: Policy advices from an agent-based model

tThe 2008 financial crisis, and the subsequent global recession, triggered a wide-spreadeconomic and political debate on the proper policy combination to deal with the crisis andto prevent similar ones in the future. Probably, the main dispute has been around the useof fiscal instruments in order to foster growth while keeping public debt under control. TheEuropean Union, for instance, endorsed “austerity” measures for fiscal consolidation but hasbeen sharply criticized by several scholars. This paper aims at contributing to the currentdebate by presenting the outcomes of a computational study performed with the Euraceagent-based model. We set up an experiment with two base policy scenarios, i.e., stabilityand growth pact and fiscal compact, incrementally enriching them with complementarypolicies which relax fiscal rigidity and introduce quantitative easing. Results show thatbudgetary rigour performs well if and only if some mechanisms of fiscal relaxation andmonetary accommodation are considered during bad times; thus confirming in a richerand more realistic model setting the fundamental tenet of Keynesian economics about theimportance of sustaining aggregate demand during recessions