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Recurrence Plot And Recurrence Quantification Analysis Techniques For Detecting A Critical Regime. Examples From Financial Market Inidices

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  • A. FABRETTI

    (SUPRATECS, B5, University of Liège, B-4000 Liège, Euroland;
    Department of Mathematics for Economy, Insurances and Finance Applications, University of Roma 1, La Sapienza I-00100 Rome, Italy)

  • M. AUSLOOS

    (SUPRATECS, B5, University of Liège, B-4000 Liège, Euroland)

Abstract

Recurrence Plot (RP) and Recurrence Quantification Analysis (RQA) are signal numerical analysis methodologies able to work with nonlinear dynamical systems and nonstationarity. Moreover, they well evidence changes in the states of a dynamical system. We recall their features and give practical recipes. It is shown that RP and RQA detect the critical regime in financial indices (in analogy with phase transition) before a bubble bursts, whence allowing to estimate the bubble initial time. The analysis is made on DAX and NASDAQ daily closing price between January 1998 and November 2003. DAX is studied in order to set-up overall considerations, and as a support for deducing technical rules. The NASDAQ bubble initial time has been estimated to be on 19 October 1999.

Suggested Citation

  • A. Fabretti & M. Ausloos, 2005. "Recurrence Plot And Recurrence Quantification Analysis Techniques For Detecting A Critical Regime. Examples From Financial Market Inidices," International Journal of Modern Physics C (IJMPC), World Scientific Publishing Co. Pte. Ltd., vol. 16(05), pages 671-706.
    • Handle: RePEc:wsi:ijmpcx:v:16:y:2005:i:05:n:s0129183105007492
    DOI: 10.1142/S0129183105007492
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    References listed on IDEAS

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    Cited by:

    1. Giuseppe Orlando & Fabio Della Rossa, 2019. "An Empirical Test on Harrod’s Open Economy Dynamics," Mathematics, MDPI, vol. 7(6), pages 1-13, June.
    2. Oya, Shunsuke & Aihara, Kazuyuki & Hirata, Yoshito, 2014. "An absolute measure for a key currency," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 407(C), pages 15-23.
    3. Jan Kodera & Tran Van Quang, 2009. "Vizuální nelineární rekurentní analýza [Visual Recurrence Analysis and its Application]," Politická ekonomie, Prague University of Economics and Business, vol. 2009(3), pages 305-322.
    4. Sergii Piskun & Oleksandr Piskun & Dmitry Chabanenko, 2011. "RQA Application for the Monitoring of Financial and Commodity markets state," Papers 1112.0297, arXiv.org.
    5. Bastos, João A. & Caiado, Jorge, 2011. "Recurrence quantification analysis of global stock markets," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 390(7), pages 1315-1325.
    6. Ioannis Andreadis & Athanasios D. Fragkou & Theodoros E. Karakasidis & Apostolos Serletis, 2023. "Nonlinear dynamics in Divisia monetary aggregates: an application of recurrence quantification analysis," Financial Innovation, Springer;Southwestern University of Finance and Economics, vol. 9(1), pages 1-17, December.
    7. Teresa Aparicio & Dulce Saura, 2013. "Do Exchange Rate Series Present General Dependence? Some Results using Recurrence Quantification Analysis," Journal of Economics and Behavioral Studies, AMH International, vol. 5(10), pages 678-686.
    8. Girault, Jean-Marc, 2015. "Recurrence and symmetry of time series: Application to transition detection," Chaos, Solitons & Fractals, Elsevier, vol. 77(C), pages 11-28.
    9. Ashe, Sinéad & Egan, Paul, 2023. "Examining financial and business cycle interaction using cross recurrence plot analysis," Finance Research Letters, Elsevier, vol. 51(C).
    10. Peter Martey Addo, 2015. "Insights to the European debt crisis using recurrence quantification and network analysis," Documents de travail du Centre d'Economie de la Sorbonne 15035, Université Panthéon-Sorbonne (Paris 1), Centre d'Economie de la Sorbonne.
    11. Saha, Debajyoti & Shaw, Pankaj Kumar & Ghosh, Sabuj & Janaki, M.S. & Sekar Iyengar, A.N., 2018. "Quantification of scaling exponent with Crossover type phenomena for different types of forcing in DC glow discharge plasma," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 490(C), pages 300-310.
    12. Marcel Ausloos, 2013. "Econophysics: Comments on a Few Applications, Successes, Methods and Models," IIM Kozhikode Society & Management Review, , vol. 2(2), pages 101-115, July.
    13. Oleksandr Piskun & Sergii Piskun, 2011. "Recurrence Quantification Analysis of Financial Market Crashes and Crises," Papers 1107.5420, arXiv.org.
    14. Mostafa Shabani & Martin Magris & George Tzagkarakis & Juho Kanniainen & Alexandros Iosifidis, 2022. "Predicting the State of Synchronization of Financial Time Series using Cross Recurrence Plots," Papers 2210.14605, arXiv.org, revised Nov 2022.
    15. Peter Martey Addo, 2015. "Insights to the European debt crisis using recurrence quantification and network analysis," Post-Print halshs-01164025, HAL.
    16. Giuseppe Orlando & Giovanna Zimatore, 2021. "Recurrence Quantification Analysis of Business Cycles," Dynamic Modeling and Econometrics in Economics and Finance, in: Giuseppe Orlando & Alexander N. Pisarchik & Ruedi Stoop (ed.), Nonlinearities in Economics, chapter 0, pages 269-282, Springer.
    17. Charakopoulos, Avraam & Karakasidis, Theodoros & Sarris, loannis, 2019. "Pattern identification for wind power forecasting via complex network and recurrence plot time series analysis," Energy Policy, Elsevier, vol. 133(C).
    18. Miśkiewicz, Janusz, 2012. "Economy with the time delay of information flow—The stock market case," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 391(4), pages 1388-1394.

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