Chaoticity Versus Stochasticity in Financial Markets: Are Daily S&P 500 Return Dynamics Chaotic?

  • In this study, we present a combinatory chaos analysis of daily wavelet-filtered (denoised) S&P 500 returns (2000–2020) compared with respective surrogate datasets, Brownian motion returns and a Lorenz system realisation. We show that the dynamics of the S&P 500 return series consist of an almost equally divided combination of stochastic and deterministic chaos. The strange attractor of the S&P 500 return system is graphically displayed via Takens’ embedding and by spectral embedding in combination with Laplacian Eigenmaps. For the field of nonlinear and financial chaos research, we present a bibliometric analysis paired with citation network analysis. We critically discuss implications and future prospects.

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Author:Markus Vogl, Peter RötzelORCiD
URL:https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3802753
Document Type:Working Paper
Language:English
Year of Completion:2021
Release Date:2021/03/17
Tag:chaos; finance; financial market; nonlinear dynamics; recurrence analysis
GND Keyword:Kreditmarkt; Chaostheorie
Urheberrecht:1
research focus :Wissensmanagement und Strukturwandel / Business Transformation and Innovation Management
Licence (German):Keine Lizenz - es gilt das deutsche Urheberrecht
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