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

Chaoticity Versus Stochasticity in Financial Markets: Are Daily S&P 500 Return Dynamics Chaotic? In: Communications in Nonlinear Science and Numerical Simulation, 108, 106218 https://www.sciencedirect.com/science/article/abs/pii/S1007570421004858#!

87 Pages Posted: 15 Mar 2021 Last revised: 25 Aug 2022

See all articles by Markus Vogl

Markus Vogl

Vogl-Datascience

Peter Gordon Roetzel

University of Stuttgart; University of Applied Sciences Aschaffenburg

Date Written: March 11, 2021

Abstract

Published in:
Chaoticity Versus Stochasticity in Financial Markets: Are Daily S&P 500 Return Dynamics Chaotic? In: Communications in Nonlinear Science and Numerical Simulation, 108, 106218 https://www.sciencedirect.com/science/article/abs/pii/S1007570421004858#!


Abstract:
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.

Keywords: nonlinear dynamics, chaos, financial chaos, recurrence analysis, financial predictions, financial markets

JEL Classification: G1, C01, C02, C22, C18

Suggested Citation

Vogl, Markus and Roetzel, Peter Gordon, Chaoticity Versus Stochasticity in Financial Markets: Are Daily S&P 500 Return Dynamics Chaotic? (March 11, 2021). Chaoticity Versus Stochasticity in Financial Markets: Are Daily S&P 500 Return Dynamics Chaotic? In: Communications in Nonlinear Science and Numerical Simulation, 108, 106218 https://www.sciencedirect.com/science/article/abs/pii/S1007570421004858#!, Available at SSRN: https://ssrn.com/abstract=3802753 or http://dx.doi.org/10.2139/ssrn.3802753

Markus Vogl (Contact Author)

Vogl-Datascience ( email )

Peter Gordon Roetzel

University of Stuttgart ( email )

Keplerstraße 17
D-70174 Stuttgart
Germany

University of Applied Sciences Aschaffenburg ( email )

Germany

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