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Journal of the Korean Physical Society

, Volume 61, Issue 4, pp 638–646 | Cite as

Entropy analysis in foreign exchange markets and economic crisis

  • Jin-Gi Ha
  • Kyubin Yim
  • Seunghwan Kim
  • Woo-Sung Jung
Research Papers

Abstract

We investigate the relative market efficiency in 11 foreign exchange markets by using the Lempel-Ziv (LZ) complexity algorithm and several entropy values such as the Shannon entropy, the approximate entropy, and the sample entropy. With daily data in 11 foreign exchange markets from Jan. 2000 to Sep. 2011, we observe that mature markets have higher LZ complexities and entropy values than emerging markets. Furthermore, with sliding time windows, we also investigate the temporal evolutions of those entropies from Jan. 1994 to Sep. 2011, and we find that, after an economic crisis, the approximate entropy and the sample entropy of mature markets such as Japan, Europe and the United Kingdom suddenly become lower.

Keywords

Entropy analysis Lempel-Ziv complexity algorithm Shannon entropy Approximate entropy Sample entropy Econophysics 

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Copyright information

© The Korean Physical Society 2012

Authors and Affiliations

  • Jin-Gi Ha
    • 1
  • Kyubin Yim
    • 1
  • Seunghwan Kim
    • 1
  • Woo-Sung Jung
    • 2
  1. 1.Department of PhysicsPohang University of Science and TechnologyPohangKorea
  2. 2.Department of Physics and Graduate Program for Technology Innovation and ManagementPohang University of Science and TechnologyPohangKorea

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