Year: 2018
Type: article
Abstract: Time irreversibility, i.e., the lack of invariance of the statistical properties of a system under time reversal, is a fundamental property of all systems operating out of equilibrium. Time reversal symmetry is associated with important statistical and physical properties and is related to the predictability of the system generating the time series. Over the past fifteen years, various methods to quantify time irreversibility in time series have been proposed, but these can be computationally expensive. Here, we propose a new method, based on permutation entropy, which is essentially parameter-free, temporally local, yields straightforward statistical tests, and has fast convergence properties. We apply this method to the study of financial time series, showing that stocks and indices present a rich irreversibility dynamics. We illustrate the comparative methodological advantages of our method with respect to a recently proposed method based on visibility graphs, and discuss the implications of our results for financial data analysis and interpretation.
Source: Entropy
DOI: 10.3390/e20090665
Language: English
Subfield: Economics and Econometrics
Domain: Social Sciences
Open Access status: gold
Estimated APC paid: $3,137
OpenAlex ID: W2897035928