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The Identification of Spurious Lyapunov Exponents in Jacobian Algorithms

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  • Gencay Ramazan

    (Department of Economics, Department of Mathematics and Statistics, University of Windsor, Windsor, Ontario, Canada, gencay@uwin)

  • Dechert W. Davis

    () (Department of Economics, University of Houston, Houston, Texas, USA)

Abstract

The method of reconstructing an n-dimensional system from observations is to form vectors of m consecutive observations, which for m 2n, is generically an embedding. This is Takens's result. The Jacobian methods for Lyapunov exponents utilize a function of m variables to model the data, and the Jacobian matrix is constructed at each point in the orbit of the data. When embedding occurs at dimension m = n, the Lyapunov exponents of the reconstructed dynamics are the Lyapunov exponents of the original dynamics. However, if embedding only occurs for an m > n, then the Jacobian method yields m Lyapunov exponents, only n of which are the Lyapunov exponents of the original system. The problem is that as currently used, the Jacobian method is applied to the full m-dimensional space of the reconstruction, and not just to the n-dimensional manifold that is the image of the embedding map. Our examples show that it is possible to obtain spurious Lyapunov exponents that are even larger than the largest Lyapunov exponent of the original system.

Suggested Citation

  • Gencay Ramazan & Dechert W. Davis, 1996. "The Identification of Spurious Lyapunov Exponents in Jacobian Algorithms," Studies in Nonlinear Dynamics & Econometrics, De Gruyter, vol. 1(3), pages 1-12, October.
  • Handle: RePEc:bpj:sndecm:v:1:y:1996:i:3:n:2
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    Citations

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    Cited by:

    1. Bask, Mikael & Liu, Tung & Widerberg, Anna, 2007. "The stability of electricity prices: Estimation and inference of the Lyapunov exponents," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 376(C), pages 565-572.
    2. Shintani, Mototsugu & Linton, Oliver, 2004. "Nonparametric neural network estimation of Lyapunov exponents and a direct test for chaos," Journal of Econometrics, Elsevier, vol. 120(1), pages 1-33, May.
    3. Simón Sosvilla-Rivero & Fernando Fernández-Rodriguez & Julián Andrada-Félix, 2005. "Testing chaotic dynamics via Lyapunov exponents," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 20(7), pages 911-930.
    4. Bask, Mikael & Widerberg, Anna, 2009. "Market structure and the stability and volatility of electricity prices," Energy Economics, Elsevier, vol. 31(2), pages 278-288, March.
    5. Anagnostidis, Panagiotis & Emmanouilides, Christos J., 2015. "Nonlinearity in high-frequency stock returns: Evidence from the Athens Stock Exchange," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 421(C), pages 473-487.
    6. Bask, Mikael, 2010. "Measuring potential market risk," Journal of Financial Stability, Elsevier, vol. 6(3), pages 180-186, September.
    7. Bask, Mikael, 2007. "Measuring potential market risk," Research Discussion Papers 20/2007, Bank of Finland.

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