Reduced-order autoregressive dynamics of a complex financial system: a PCA-based approach
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arXiv
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| Main Authors: | , , , |
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| Format: | Preprint |
| Published: |
2022
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| _version_ | 1866908728994824192 |
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| author | Khalilian, Pouriya Azizi, Sara Amiri, Mohammad Hossein Firouzjaee, Javad T. |
| author_facet | Khalilian, Pouriya Azizi, Sara Amiri, Mohammad Hossein Firouzjaee, Javad T. |
| contents | This study analyzes the dynamic interactions among the NASDAQ index, crude oil, gold, and the US dollar using a reduced-order modeling approach. Time-delay embedding and principal component analysis are employed to encode high-dimensional financial dynamics, followed by linear regression in the reduced space. Correlation and lagged regression analyses reveal heterogeneous cross-asset dependencies. Model performance, evaluated using the coefficient of determination ($R^2$), demonstrates that a limited number of principal components is sufficient to capture the dominant dynamics of each asset, with varying complexity across markets. |
| format | Preprint |
| id |
arxiv_https___arxiv_org_abs_2212_12044 |
| institution | arXiv |
| publishDate | 2022 |
| record_format | arxiv |
| spellingShingle | Reduced-order autoregressive dynamics of a complex financial system: a PCA-based approach Khalilian, Pouriya Azizi, Sara Amiri, Mohammad Hossein Firouzjaee, Javad T. Statistical Finance Artificial Intelligence This study analyzes the dynamic interactions among the NASDAQ index, crude oil, gold, and the US dollar using a reduced-order modeling approach. Time-delay embedding and principal component analysis are employed to encode high-dimensional financial dynamics, followed by linear regression in the reduced space. Correlation and lagged regression analyses reveal heterogeneous cross-asset dependencies. Model performance, evaluated using the coefficient of determination ($R^2$), demonstrates that a limited number of principal components is sufficient to capture the dominant dynamics of each asset, with varying complexity across markets. |
| title | Reduced-order autoregressive dynamics of a complex financial system: a PCA-based approach |
| topic | Statistical Finance Artificial Intelligence |
| url | https://arxiv.org/abs/2212.12044 |