Nonlinear Noise Estimation in International Stock Markets: Coarse-Grained Entropy Method

Introduction Traditional fi nancial models are linear equilibrium models based on rational expectation. Excluding the infl uence of psychological factors such as greed and fear, these models depict the negative feedback leading to the stabilization of fi nancial system and indicate that the response to exogenous disturbance of fi nancial system is reverting to the equilibrium in a continuous and linear way.