Abstract
A new concept named volatility monotonous persistence duration (VMPD) dynamics is introduced into the research of energy markets, in an attempt to describe nonlinear fluctuation behaviors from a new perspective. The VMPD sequence unites the maximum fluctuation difference and the continuous variation length, which is regarded as a novel indicator to evaluate risks and optimize portfolios. Further, two main aspects of statistical and nonlinear empirical research on the energy VMPD sequence are observed: probability distribution and autocorrelation behavior. Moreover, a new nonlinear method named the cross complexity-invariant distance (CID) FuzzyEn (CCF) which is composed of cross-fuzzy entropy and complexity-invariant distance is firstly proposed to study the complexity synchronization properties of returns and VMPD series for seven representative energy items. We also apply the ensemble empirical mode decomposition (EEMD) to resolve returns and VMPD sequence into the intrinsic mode functions, and the degree that they follow the synchronization features of the initial sequence is investigated.
Highlights
Financial markets have a large number of participants
The price formation of economic market is the result of the complicated action of many factors, and entropy is an index of pattern diversity in time series
On account of the above considerations, we put forward a new method called the cross CID Fuzzy entropy (FuzzyEn) (CCF), which is composed of cross-fuzzy entropy and complexity-invariant distance to calculate the synchronization for two time series of the same length
Summary
Financial markets have a large number of participants. With the continuous financial innovation, more and new financial instruments have made investors have more investment choices. On account of the above considerations, we put forward a new method called the cross CID FuzzyEn (CCF), which is composed of cross-fuzzy entropy and complexity-invariant distance to calculate the synchronization for two time series of the same length. One is that a new idea of volatility monotonous persistence duration (VMPD) time sequence is put forward to investigate the energy market fluctuation behaviors from a new perspective. The other is that a new nonlinear estimate method – the cross CID FuzzyEn (CCF) composed of cross-fuzzy entropy and complexity-invariant distance is put forward, and the CCF analysis is applied for seven actual representative energy items to investigate the synchronization features of returns and VMPD series. The EEMD algorithm is used to resolve the returns and VMPD sequence into the intrinsic mode functions to further investigate the corresponding synchronization behaviors This present work can provide new insights into the price volatility dynamics.
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