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I have been working with some applications and programs developed by John
Conover. I have had particularly good results using his TsInvest program
for stock selection.
http://www.johncon.com/ntropix/index.html
John is an Electrical Engineer, He is currently the Chief Technology
Officer of the Open Source Group, Inc. He has put more then 10 years in
developing this work. He has made his ideas available on the net at the
above address. This is a brief extract from his home page.
"J. L. Kelly, Jr. established the isomorphism between the
information-theoretic concept of information rate in a binary symmetric
channel and speculation under uncertainty. The concept was presented in
the Bell System Technical Journal in 1956. The importance of Kelly's
contribution can not be underestimated since it made the large
mathematical infrastructure of information theory, developed by Claude
Shannon in the mid 1940's, applicable to the analysis of speculative
endeavors.
In 1963, Benoit Mandelbrot, citing Wesley Claire Mitchell's work of 1915,
formulated a theory of price fluctuations in speculative markets based on
the probability distributions discovered by the French mathematician Paul
Levy. The Gaussian distribution is a special case of Levy distributions.
By the mid 1990's, largely through the efforts of W. Brian Arthur of
Stanford University, bounded rationality and self-referential
indeterminism were generally accepted as the cause of the stochastic
characteristics of speculative markets. Today, stochastic market analysis
is a firmly entrenched branch of information theory, as are other
economic applications of entropic principles."
One of the tools he has is a program for calculating "Shannon
Probability", sometimes referred to as "Shannon Entropy". In his list of
utilities is an app called "Tsshannonwindow". This allows you to
calculate the Shannon Probability for a moving window of predetermined
length. I have attached a .gif of the OEX close and a Shannon Window
Analysis for a 5 day period. While I do not think that this was exactly
what John had intended as a use for this, I found the results very
useful. This program along with many other utilities and the TsInvest
program with full documentation is available for download. You have to
compile the code. I have a copy of the Tsshannonwindow program already
complied. It is 118kb so it is easy to email. I have not attached it to
this email because some members do not like to receive these types of
attachments. If you cannot get it to work from the Ntropix site I will
email the compiled version if you request it. Please make note of Johns
license agreement. He freely distributes the code. He only asks that if
you intend to incorporate this into a commercial application, that he be
contacted first.
Ron McEwan
Attachment Converted: "f:\eudora\attach\tswindow.gif"
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