Scaling characteristics in the Taiwan stock market

Ding-Shun Ho, Chung-Kung Lee, Cheng-Cai Wang and Mang Chuang

Physica A: Statistical Mechanics and its Applications, 2004, vol. 332, issue C, 448-460

Abstract: Some statistical tools, including histogram, spectral analysis and fractal theory, were used on the daily Taiwan stock price index (TSPI) from 1987 to 2002 to examine the possible scale-invariant behavior and the clustering characteristics in Taiwan stock market. It was found that the TSPI data exhibited the characteristic of right-skewed frequency distribution. The long-term memory and the possibility of scale invariance were roughly identified through the analysis of autocorrelation and power spectrum, respectively. The monofractal analysis was then performed by the box-counting method. Scale invariance was clearly found in the time series and the box dimension was shown to be a decreasing function of the threshold index level, implying multifractal characteristics, i.e., the low and high regions scale differently. To test this hypothesis, the time series were transferred into a useful compact form through the multifractal formalism, namely, the τ(q)–q and f(α)–α plots. The analysis confirmed the existence of multifractal characteristics in the investigated time series. The origin of multifractal phenomena in Taiwan stock market might be interpreted in terms of the multiplicative cascade process of stock market information.

Keywords: Stock index; Scale invariance; Box dimension; Multifractal; Multiplicative cascade process (search for similar items in EconPapers)
Date: 2004
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Citations: View citations in EconPapers (14)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:phsmap:v:332:y:2004:i:c:p:448-460

DOI: 10.1016/j.physa.2003.10.023

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