A New Method for Determining the Embedding Dimension of Financial Time Series Based on Manhattan Distance and Recurrence Quantification Analysis

Abstract

Identification of embedding dimension is helpful to the reconstruction of phase space. However, it is difficult to calculate the proper embedding dimension for the financial time series of dynamics. By this Letter, we suggest a new method based on Manhattan distance and recurrence quantification analysis for determining the embedding dimension. By the advantages of the above two tools, the new method can calculate the proper embedding dimension with the feature of stability, accuracy and rigor. Besides, it also has a good performance on the chaotic time series which has a high-dimensional attractors.