Application of the Von Mises’ Axiom of Randomness on the Forecasts Concerning the Dynamics of a Non-Stationary System Described by a Numerical Sequence

6 Pages Posted: 3 Feb 2019

Date Written: January 21, 2019

Abstract

In this article, we will describe the dynamics of a non-stationary system using a numerical sequence, in which the value of terms varies within the number of degrees of freedom of the system. This numerical sequence allows us to use the Von Mises’ axiom of randomness as an analysis method concerning the results obtained from the forecasts on the evolutions of a non-stationary system. The meaning of this axiom is as follows: when we understand a pattern about a numerical sequence, we obtain results, intended as forecast on the next sequence number, which cannot be reproduced randomly. In practice, this axiom defines a statistical method capable of understanding, if the results have been obtained by a random algorithm or by a cognitive algorithm that implements a pattern present in the system. This approach is particularly useful for analysing non-stationary systems, whose characteristic is to generate non-independent results and therefore not statistically significant. The most important example of a non-stationary system are financial markets, and for this reason, the primary application of this method is the analysis of trading strategies.

Keywords: Trading Models, Investment Strategies, Non-Ergodic, Performance Measurement, Risk Management

JEL Classification: C02

Suggested Citation

Berdondini, Andrea, Application of the Von Mises’ Axiom of Randomness on the Forecasts Concerning the Dynamics of a Non-Stationary System Described by a Numerical Sequence (January 21, 2019). Available at SSRN: https://ssrn.com/abstract=3319864 or http://dx.doi.org/10.2139/ssrn.3319864

Andrea Berdondini (Contact Author)

Independent ( email )

No Address Available

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