Abstract
Research background: The application of non-linear analysis and chaos theory modelling on financial time series in the discipline of Econophysics.
 Purpose of the article: The main aim of the article is to identify the deterministic chaotic behavior of stock prices with reference to Amazon using daily data from Nasdaq-100.
 Methods: The paper uses nonlinear methods, in particular chaos theory modelling, in a case study exploring and forecasting the daily Amazon stock price.
 Findings & Value added: The results suggest that the Amazon stock price time series is a deterministic chaotic series with a lot of noise. We calculated the invariant parameters such as the maxi-mum Lyapunov exponent as well as the correlation dimension, managed a two-days-ahead forecast through phase space reconstruction and a grouped data handling method.
Highlights
The “Black Monday” of Stock Markets in 1987 along with the one of 2008, are clear failures of the standard economic view with regard to the existing financial analytic tools
A possible framework for modeling economic phenomena is presented based on nonlinear dynamics and chaos theory modeling
Chaos theory is a convenient approach for the examination of the attributes of financial data, since the behavior of the financial markets is influenced by several factors that are relative to the market and can be affected by both internal and external causes
Summary
The “Black Monday” of Stock Markets in 1987 along with the one of 2008, are clear failures of the standard economic view with regard to the existing financial analytic tools. In 1995, Mantegna and Stanley (1995) introduced a new research field using the term “EconoPhysics”. Adding to this field, a possible framework for modeling economic phenomena is presented based on nonlinear dynamics and chaos theory modeling. The term chaos or chaotic system refers to a dynamic system that is sensitive to even small changes in its initial condition. This change is a natural process, but it is hard to be predicted or at least cannot be estimated using Newton's laws of physics. Chaos theory is a convenient approach for the examination of the attributes of financial data, since the behavior of the financial markets is influenced by several factors that are relative to the market and can be affected by both internal and external causes
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