A comparative study of symbolic aggregate approximation and topological data analysis
The movement of stocks is often perceived as random due to the complex interactions between different stocks and the inherently chaotic nature of the market. This study investigated the similarity in stock movements across multiple industry sectors in Europe. Specifically, we applied topological dat...
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| Format: | Article |
| Language: | English |
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AIMS Press
2024-10-01
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| Series: | Quantitative Finance and Economics |
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| Online Access: | https://www.aimspress.com/article/doi/10.3934/QFE.2024027 |
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| _version_ | 1832590254345814016 |
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| author | Fredrik Hobbelhagen Ioannis Diamantis |
| author_facet | Fredrik Hobbelhagen Ioannis Diamantis |
| author_sort | Fredrik Hobbelhagen |
| collection | DOAJ |
| description | The movement of stocks is often perceived as random due to the complex interactions between different stocks and the inherently chaotic nature of the market. This study investigated the similarity in stock movements across multiple industry sectors in Europe. Specifically, we applied topological data analysis (TDA) to analyze stock time series data and compared the results with those obtained using an expanded form of a more classical time series analysis method, symbolic aggregate approximation (SAX). Our findings indicated that while TDA offered detailed insights into 'local' stock movements, SAX was more effective in capturing broader trends in financial markets, where less detail was required, making it suitable for portfolio optimization. We also presented an extension of SAX that incorporated volatility measures, improving its performance in highly volatile markets. |
| format | Article |
| id | doaj-art-5e35c33fb1d540a0bc3b378d910e83c9 |
| institution | Kabale University |
| issn | 2573-0134 |
| language | English |
| publishDate | 2024-10-01 |
| publisher | AIMS Press |
| record_format | Article |
| series | Quantitative Finance and Economics |
| spelling | doaj-art-5e35c33fb1d540a0bc3b378d910e83c92025-01-24T01:12:54ZengAIMS PressQuantitative Finance and Economics2573-01342024-10-018470573210.3934/QFE.2024027A comparative study of symbolic aggregate approximation and topological data analysisFredrik Hobbelhagen0Ioannis Diamantis1School of Business and Economics, Maastricht University, P.O.BOX 616, 6200 MD, Maastricht, The NetherlandsSchool of Business and Economics, Maastricht University, P.O.BOX 616, 6200 MD, Maastricht, The NetherlandsThe movement of stocks is often perceived as random due to the complex interactions between different stocks and the inherently chaotic nature of the market. This study investigated the similarity in stock movements across multiple industry sectors in Europe. Specifically, we applied topological data analysis (TDA) to analyze stock time series data and compared the results with those obtained using an expanded form of a more classical time series analysis method, symbolic aggregate approximation (SAX). Our findings indicated that while TDA offered detailed insights into 'local' stock movements, SAX was more effective in capturing broader trends in financial markets, where less detail was required, making it suitable for portfolio optimization. We also presented an extension of SAX that incorporated volatility measures, improving its performance in highly volatile markets.https://www.aimspress.com/article/doi/10.3934/QFE.2024027topological data analysissymbolic aggregate approximationcomparison, time series, stock markets |
| spellingShingle | Fredrik Hobbelhagen Ioannis Diamantis A comparative study of symbolic aggregate approximation and topological data analysis Quantitative Finance and Economics topological data analysis symbolic aggregate approximation comparison, time series, stock markets |
| title | A comparative study of symbolic aggregate approximation and topological data analysis |
| title_full | A comparative study of symbolic aggregate approximation and topological data analysis |
| title_fullStr | A comparative study of symbolic aggregate approximation and topological data analysis |
| title_full_unstemmed | A comparative study of symbolic aggregate approximation and topological data analysis |
| title_short | A comparative study of symbolic aggregate approximation and topological data analysis |
| title_sort | comparative study of symbolic aggregate approximation and topological data analysis |
| topic | topological data analysis symbolic aggregate approximation comparison, time series, stock markets |
| url | https://www.aimspress.com/article/doi/10.3934/QFE.2024027 |
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