Entropy, bifurcation and dynamic market disequilibrium.

Lags in information dissemination and the following market disequilibrium are emphasized by many studies in finance literature. Work with chemical processes by Nicolis and Prigogine (1977) has eased the stationary stochastic process assumptions. The major instruments used by them are entropy theory and bifurcation theory. A survey is made of the studies in financial market disequilibrium, and an application of entropy and bifurcation theories to financial market disequilibrium is discussed. Testing market data to see whether the market process is stationary stochastic or nonstationary stochastic is troublesome. Methods for testing the nonstationary disequilibrium model include: 1. examining dramatic swings in the market dependence structure, and 2. studying the behavior before and after some structural alteration in the market.

Main Author: Nawrocki, David.
Language: English
Published: 1984
Online Access: http://ezproxy.villanova.edu/login?url=https://digital.library.villanova.edu/Item/vudl:178237