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Modeling the predictive power of the singular value decomposition-based entropy. Empirical evidence from the Dow Jones Global Titans 50 Index

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  • Busu, Cristian
  • Busu, Mihail

Abstract

In this paper we are analyzing the predictive power of the singular value decomposition entropy for the Dow Jones Global Titans 50 (DJGT) index of the New York Stock Exchange (NYSE) market. For the correlation matrix of the DJGT index components we then calculate the entropy of the singular value decomposition. Granger causality test was used to prove that entropy has a predictive power for stock market dynamics of the DJGT index. The results of our paper are revealing the importance of considering structural breaks when analyzing financial stock markets. Our analysis is conducting to the conclusion that the singular value decomposition entropy has predictive power for the NYSE - DJGT index.

Suggested Citation

  • Busu, Cristian & Busu, Mihail, 2019. "Modeling the predictive power of the singular value decomposition-based entropy. Empirical evidence from the Dow Jones Global Titans 50 Index," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 534(C).
    • Handle: RePEc:eee:phsmap:v:534:y:2019:i:c:s0378437119304340
    DOI: 10.1016/j.physa.2019.04.055
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