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Chaos and Nonlinear Forecastability in Economics and Finance

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  • Blake LeBaron

    (University of Wisconsin)

Abstract

Both academic and applied researchers studying financial markets and other economic series have become interested in the topic of chaotic dynamics. The possibility of chaos in financial markets opens important questions for both economic theorists as well as financial market participants. This paper will clarify the empirical evidence for chaos in financial markets and macroeconomic series. It will also compare these two concepts from a financial market perspective contrasting the objectives of the practitioner with those of economic researchers. Finally, the paper will speculate on the impact of chaos and nonlinear modeling on future economic research.

Suggested Citation

  • Blake LeBaron, 1994. "Chaos and Nonlinear Forecastability in Economics and Finance," Finance 9411001, University Library of Munich, Germany.
    • Handle: RePEc:wpa:wuwpfi:9411001
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    References listed on IDEAS

    as
    1. Clive W. Granger & Timo Terasvirta & Heather M. Anderson, 1993. "Modeling Nonlinearity over the Business Cycle," NBER Chapters, in: Business Cycles, Indicators, and Forecasting, pages 311-326, National Bureau of Economic Research, Inc.
    2. Blake LeBaron, "undated". "Technical Trading Rules and Regime Shifts in Foreign Exchange," Working papers _007, University of Wisconsin - Madison.
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    6. Ramsey, James B & Sayers, Chera L & Rothman, Philip, 1990. "The Statistical Properties of Dimension Calculations Using Small Data Sets: Some Economic Applications," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 31(4), pages 991-1020, November.
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    9. Blake LeBaron, "undated". "The Joint Dynamics and Stability of Stock Prices and Volume," Working papers _004, University of Wisconsin - Madison.
    10. Frank, Murray & Gencay, Ramazan & Stengos, Thanasis, 1988. "International chaos?," European Economic Review, Elsevier, vol. 32(8), pages 1569-1584, October.
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    Full references (including those not matched with items on IDEAS)

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    • G - Financial Economics

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