Entropy Test: Identifying the Dimension Where Deterministic Chaos is alive in Financial Markets
This article was written by Sergey Okun – Senior Financial Analyst, I Know First, Ph.D. in Economics.
Summary:
- The approximate entropy test enables us to identify when deterministic chaotic patterns start in financial assets.
- There are non-linear dependence patterns in the 3-day interval for the S&P500, precious metal ETFs, volatility ETFs, debt market ETFs, real-estate ETF, US dollar ETF, and cryptocurrencies.
- We could not reject the hypothesis of linear dependence for the platinum ETF.
- The I Know First AI algorithm allows for identifying non-linear dependencies in financial assets to find the most promising investment opportunities.