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Financial Markets: Very Noisy Information Malik MagdonIsmail, Alexander Nicholson and Yaser S. AbuMostafa

Summary: 1
Financial Markets: Very Noisy Information
Malik Magdon­Ismail, Alexander Nicholson and Yaser S. Abu­Mostafa
Abstract--- We report new results about the impact of
noise on information processing, with application to finan­
cial markets. These results quantify the tradeoff between
the amount of data and the noise level in the data. They also
provide estimates for the performance of a learning system
in terms of the noise level. We use these results to derive a
method for detecting the change in market volatility from
period to period. We successfully apply these results to the
four major foreign exchange markets. The results hold for
linear as well as non­linear learning models and algorithms,
and for different noise models.
Keywords--- Learning, Noise, Convergence, Bounds, Test
Error, Generalization Error, Model Limitation, Volatility.
I. Introduction
NFORMATION processing of financial data entails the


Source: Abu-Mostafa, Yaser S. - Department of Mechanical Engineering & Computer Science Department, California Institute of Technology


Collections: Computer Technologies and Information Sciences