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Algorithmic Complexity of Financial Motions

Author

Listed:
  • Olivier Brandouy
  • Jean-Paul Delahaye
  • Lin Ma
  • Hector Zenil

Abstract

We survey the main applications of algorithmic (Kolmogorov) complexity to the problem of price dynamics in financial markets. We stress the differences between these works and put forward a general algorithmic framework in order to highlight its potential for financial data analysis. This framework is “general" in the sense that it is not constructed on the common assumption that price variations are predominantly stochastic in nature.

Suggested Citation

  • Olivier Brandouy & Jean-Paul Delahaye & Lin Ma & Hector Zenil, 2012. "Algorithmic Complexity of Financial Motions," ASSRU Discussion Papers 1204, ASSRU - Algorithmic Social Science Research Unit.
    • Handle: RePEc:trn:utwpas:1204
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    References listed on IDEAS

    as
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    Cited by:

    1. Brandouy, Olivier & Delahaye, Jean-Paul & Ma, Lin & Zenil, Hector, 2014. "Algorithmic complexity of financial motions," Research in International Business and Finance, Elsevier, vol. 30(C), pages 336-347.
    2. Fernando Soler-Toscano & Hector Zenil & Jean-Paul Delahaye & Nicolas Gauvrit, 2014. "Calculating Kolmogorov Complexity from the Output Frequency Distributions of Small Turing Machines," PLOS ONE, Public Library of Science, vol. 9(5), pages 1-18, May.
    3. Daniel Wilson-Nunn & Hector Zenil, 2014. "On the Complexity and Behaviour of Cryptocurrencies Compared to Other Markets," Papers 1411.1924, arXiv.org.
    4. Serbera, Jean-Philippe & Paumard, Pascal, 2016. "The fall of high-frequency trading: A survey of competition and profits," Research in International Business and Finance, Elsevier, vol. 36(C), pages 271-287.

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    More about this item

    Keywords

    algorithmic information theory; Kolmogorov complexity; financial returns; market efficiency; compression algorithms; information theory; randomness; price movements; algorithmic probability;
    All these keywords.

    JEL classification:

    • C43 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Index Numbers and Aggregation
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions

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