Quantifying the Multiscale Predictability of Financial Time Series by an Information-Theoretic Approach

Enhancing Predictability Assessment: An Overview and Analysis of Predictability Measures for Time Series and Network Links

Driven by the variety of available measures intended to estimate predictability of diverse objects such as time series and network links, this paper presents a comprehensive overview of the existing literature in this domain. Our overview delves into predictability from two distinct perspectives: the intrinsic predictability, which represents a data property independent of the chosen forecasting model and serves as the highest achievable forecasting quality level, and the realized predictability, which represents a chosen quality metric for a specific pair of data and model. The reviewed measures are used to assess predictability across different objects, starting from time series (univariate, multivariate, and categorical) to network links. Through experiments, we establish a noticeable relationship between measures of realized and intrinsic predictability in both generated and real-world time series data (with the correlation coefficient being statistically significant at a 5% significance level). The discovered correlation in this research holds significant value for tasks related to evaluating time series complexity and their potential to be accurately predicted.

Evaluation of Design Method for Highway Adjacent Tunnel and Exit Connection Section Length Based on Entropy Method

With the continuous construction of transportation infrastructure, intersection nodes have been increasing rapidly, bringing growing numbers of tunnel- and exit-adjacent sections (TEAS) in mountain expressways in China. With the complex variation in the surrounding environment, drivers always face congestion and confusion on tunnel and the exit connecting sections (TECS) without adequate length, meanwhile excessively long TECS create detours. To better provide a sustainable design strategy for TEAS, based on a certain section of expressway in Shaanxi, China, this paper establishes a theoretical calculation model through analysis. The characteristics of traffic flow and drivers' light adaptation at tunnel exit are obtained through data collection and driving tests, and the length requirements of the tunnel and exit connecting sections (TECS) are discussed. A VISSIM microscopic simulation model is also built under various design schemes and entropy-based multi-attribute decision making (EBMADM) is used to objectively calculate the weights of the four selected evaluation indexes. Then, the design schemes of the TECS with different lengths have been comprehensively evaluated. The results show the match between the evaluation results of EBMADM with theoretical calculations under existing traffic conditions, which proves the rationality of EBMADM in such problems. For more cases, the results of the EBMADM evaluation show a positive correlation between the length of TECS for the best performing design scheme with traffic volume and diverging ratio.

Exploring the Relationship among Predictability, Prediction Accuracy and Data Frequency of Financial Time Series

In this paper, we aim to reveal the connection between the predictability and prediction accuracy of stock closing price changes with different data frequencies. To find out whether data frequency will affect its predictability, a new information-theoretic estimator Plz, which is derived from the Lempel-Ziv entropy, is proposed here to quantify the predictability of five-minute and daily price changes of the SSE 50 index from the Chinese stock market. Furthermore, the prediction method EEMD-FFH we proposed previously was applied to evaluate whether financial data with higher sampling frequency leads to higher prediction accuracy. It turns out that intraday five-minute data are more predictable and also have higher prediction accuracy than daily data, suggesting that the data frequency of stock returns affects its predictability and prediction accuracy, and that higher frequency data have higher predictability and higher prediction accuracy. We also perform linear regression for the two frequency data sets; the results show that predictability and prediction accuracy are positive related.

A Labeling Method for Financial Time Series Prediction Based on Trends

Time series prediction has been widely applied to the finance industry in applications such as stock market price and commodity price forecasting. Machine learning methods have been widely used in financial time series prediction in recent years. How to label financial time series data to determine the prediction accuracy of machine learning models and subsequently determine final investment returns is a hot topic. Existing labeling methods of financial time series mainly label data by comparing the current data with those of a short time period in the future. However, financial time series data are typically non-linear with obvious short-term randomness. Therefore, these labeling methods have not captured the continuous trend features of financial time series data, leading to a difference between their labeling results and real market trends. In this paper, a new labeling method called "continuous trend labeling" is proposed to address the above problem. In the feature preprocessing stage, this paper proposed a new method that can avoid the problem of look-ahead bias in traditional data standardization or normalization processes. Then, a detailed logical explanation was given, the definition of continuous trend labeling was proposed and also an automatic labeling algorithm was given to extract the continuous trend features of financial time series data. Experiments on the Shanghai Composite Index and Shenzhen Component Index and some stocks of China showed that our labeling method is a much better state-of-the-art labeling method in terms of classification accuracy and some other classification evaluation metrics. The results of the paper also proved that deep learning models such as LSTM and GRU are more suitable for dealing with the prediction of financial time series data.

Multiscale Quantile Correlation Coefficient: Measuring Tail Dependence of Financial Time Series

In the context of the frequent occurrence of extreme events, measuring the tail dependence of financial time series is essential for maintaining the sustainable development of financial markets. In this paper, a multiscale quantile correlation coefficient (MQCC) is proposed to measure the tail dependence of financial time series. The new MQCC method consists of two parts: the multiscale analysis and the correlation analysis. In the multiscale analysis, the coarse graining approach is used to study the financial time series on multiple temporal scales. In the correlation analysis, the quantile correlation coefficient is applied to quantify the correlation strength of different data quantiles, especially regarding the difference and the symmetry of tails. One reason to adopt this method is that the conditional distribution of the explanatory variables can be characterized by the quantile regression, rather than simply by the conditional expectation analysis in the traditional regression. By applying the MQCC method in the financial markets of different regions, many interesting results can be obtained. It is worth noting that there are significant differences in tail dependence between different types of financial markets.

Multiscale Entropy Approaches and Their Applications

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Claudel C. Evaluating Signalization and Channelization Selections at Intersections Based on an Entropy Method

Direct left turns (DLTs) could cause traffic slowdown, delay, stops, and even accidents on intersections, especially on no-median roads. Channelization and signalization can significantly diminish negative impact of DLTs. In China, a total of 56 large and medium-sized cities, including 17 provincial capitals, have adopted vehicle restriction policies due to traffic congestion, vehicle energy conservation and emission reduction, which cause travel inconvenience for citizens. This paper mainly studies signalization and channelization selections at intersections based on an entropy method. Based on the commonly used three evaluation indexes, the number of vehicles, CO emissions and fuel consumption have been added. The entropy evaluation method (EEM) method is innovatively used to objectively calculate the weight of the six indexes, which carry out the optimal traffic volume combinations for intersections of present situation, channelization and signalization. A VISSIM simulation is also used to evaluate the operating status of three conditions. The results show that EEM could help enormously in choosing different methods at a certain intersection. With the EEM, six indexes decrease by 20–70% at most.