Nonlinear Dynamics and Recurrence Plots for Detecting Financial Crisis

URL des Documents de travail : http://ces.univ-paris1.fr/cesdp/cesdp2013.htmlDocuments de travail du Centre d'Economie de la Sorbonne 2013.24 - ISSN : 1955-611XIdentification of financial bubbles and crisis is a topic of major concern since it is important to prevent collapses that can severely impact nations and economies. Our analysis deals with the use of the recently proposed "delay vector variance" (DVV) method, which examines local predictability of a signal in the phase space to detect the presence of determinism and nonlinearity in a time series. Optimal embedding parameters used in the DVV analysis are obtained via a differential entropy based method using wavelet-based surrogates. We exploit the concept of recurrence plots to study the stock market to locate hidden patterns, non-stationarity, and to examine the nature of these plots in events of financial crisis. In particular, the recurrence plots are employed to detect and characterize financial cycles. A comprehensive analysis of the feasibility of this approach is provided. We show that our methodology is useful in the diagnosis and detection of financial bubbles, which have significantly impacted economic upheavals in the past few decades.L'identification des bulles financières et des crises est un sujet de préoccupation majeure en économie et finance. En vue d'apporter une approche nouvelle pour traiter ce problème, nous utilisons la méthode de "delay vector variance" sur le marché boursier. Cette approche nous permet de détecter et caractériser les cycles financiers. Nous apportons aussi un diagnostic sur les bulles financières