{"title":"The Theory of Intrinsic Time: A Primer","authors":"James B. Glattfelder, Richard B. Olsen","doi":"arxiv-2406.07354","DOIUrl":null,"url":null,"abstract":"The concept of time mostly plays a subordinate role in finance and economics.\nThe assumption is that time flows continuously and that time series data should\nbe analyzed at regular, equidistant intervals. Nonetheless, already nearly 60\nyears ago, the concept of an event-based measure of time was first introduced.\nThis paper expands on this theme by discussing the paradigm of intrinsic time,\nits origins, history, and modern applications. Departing from traditional,\ncontinuous measures of time, intrinsic time proposes an event-based,\nalgorithmic framework that captures the dynamic and fluctuating nature of\nreal-world phenomena more accurately. Unsuspected implications arise in general\nfor complex systems and specifically for financial markets. For instance, novel\nstructures and regularities are revealed, otherwise obscured by any analysis\nutilizing equidistant time intervals. Of particular interest is the emergence\nof a multiplicity of scaling laws, a hallmark signature of an underlying\norganizational principle in complex systems. Moreover, a central insight from\nthis novel paradigm is the realization that universal time does not exist;\ninstead, time is observer-dependent, shaped by the intrinsic activity unfolding\nwithin complex systems. This research opens up new avenues for economic\nmodeling and forecasting, paving the way for a deeper understanding of the\ninvisible forces that guide the evolution and emergence of market dynamics and\nfinancial systems. An exciting and rich landscape of possibilities emerges\nwithin the paradigm of intrinsic time.","PeriodicalId":501139,"journal":{"name":"arXiv - QuantFin - Statistical Finance","volume":"95 1","pages":""},"PeriodicalIF":0.0000,"publicationDate":"2024-06-11","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":"0","resultStr":null,"platform":"Semanticscholar","paperid":null,"PeriodicalName":"arXiv - QuantFin - Statistical Finance","FirstCategoryId":"1085","ListUrlMain":"https://doi.org/arxiv-2406.07354","RegionNum":0,"RegionCategory":null,"ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":null,"EPubDate":"","PubModel":"","JCR":"","JCRName":"","Score":null,"Total":0}
引用次数: 0
Abstract
The concept of time mostly plays a subordinate role in finance and economics.
The assumption is that time flows continuously and that time series data should
be analyzed at regular, equidistant intervals. Nonetheless, already nearly 60
years ago, the concept of an event-based measure of time was first introduced.
This paper expands on this theme by discussing the paradigm of intrinsic time,
its origins, history, and modern applications. Departing from traditional,
continuous measures of time, intrinsic time proposes an event-based,
algorithmic framework that captures the dynamic and fluctuating nature of
real-world phenomena more accurately. Unsuspected implications arise in general
for complex systems and specifically for financial markets. For instance, novel
structures and regularities are revealed, otherwise obscured by any analysis
utilizing equidistant time intervals. Of particular interest is the emergence
of a multiplicity of scaling laws, a hallmark signature of an underlying
organizational principle in complex systems. Moreover, a central insight from
this novel paradigm is the realization that universal time does not exist;
instead, time is observer-dependent, shaped by the intrinsic activity unfolding
within complex systems. This research opens up new avenues for economic
modeling and forecasting, paving the way for a deeper understanding of the
invisible forces that guide the evolution and emergence of market dynamics and
financial systems. An exciting and rich landscape of possibilities emerges
within the paradigm of intrinsic time.