Codependence (Presentation Slides)
30 Pages Posted: 15 Jan 2020 Last revised: 17 Jan 2020
Date Written: January 2, 2020
Two random variables are codependent when knowing the value of one helps us determine the value of the other. This should not me confounded with the notion of causality.
Correlation is perhaps the best known measure of codependence in econometric studies. Despite its popularity among economists, correlation has many known limitations in the contexts of financial studies.
In this seminar we will explore more modern measures of codependence, based on information theory, which overcome some of the limitations of correlations.
Keywords: Machine learning, artificial intelligence, asset management
JEL Classification: G0, G1, G2, G15, G24, E44
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