Diffusion entropy analysis on the scaling behavior of financial markets

Shi-Min Cai, Pei-Ling Zhou, Hui-Jie Yang, Chun-Xia Yang, Bing-Hong Wang and Tao Zhou

Physica A: Statistical Mechanics and its Applications, 2006, vol. 367, issue C, 337-344

Abstract: In this paper the diffusion entropy technique is applied to investigate the scaling behavior of financial markets. The scaling behaviors of four representative stock markets, Dow Jones Industrial Average, Standard&Poor 500, Heng Seng Index, and Shang Hai Stock Synthetic Index, are almost the same; with the scale-invariance exponents all in the interval [0.92,0.95]. We also estimate the local scaling exponents which indicate the financial time series is homogenous perfectly. In addition, a parsimonious percolation model for stock markets is proposed, of which the scaling behavior agrees with the real-life markets well.

Keywords: Diffusion entropy analysis; Financial market; Artificial stock market (search for similar items in EconPapers)
Date: 2006
References: View complete reference list from CitEc
Citations: View citations in EconPapers (7)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:phsmap:v:367:y:2006:i:c:p:337-344

DOI: 10.1016/j.physa.2005.12.004

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