The distribution and scaling of fluctuations for Hang Seng index in Hong Kong stock market

B.H. Wang and P.M. Hui
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B.H. Wang: Department of Modern Physics and Nonlinear Science Center, University of Science and Technology of China, Hefei 230026, PR China
P.M. Hui: Department of Physics, The Chinese University of Hong Kong, Shatin, New Territories, Hong Kong, PR China

The European Physical Journal B: Condensed Matter and Complex Systems, 2001, vol. 20, issue 4, 573-579

Abstract: Abstract: The statistical properties of the Hang Seng index in the Hong Kong stock market are analyzed. The data include minute by minute records of the Hang Seng index from January 3, 1994 to May 28, 1997. The probability distribution functions of index returns for the time scales from 1 minute to 128 minutes are given. The results show that the nature of the stochastic process underlying the time series of the returns of Hang Seng index cannot be described by the normal distribution. It is more reasonable to model it by a truncated Lévy distribution with an exponential fall-off in its tails. The scaling of the maximium value of the probability distribution is studied. Results show that the data are consistent with scaling of a Lévy distribution. It is observed that in the tail of the distribution, the fall-off deviates from that of a Lévy stable process and is approximately exponential, especially after removing daily trading pattern from the data. The daily pattern thus affects strongly the analysis of the asymptotic behavior and scaling of fluctuation distributions.

Keywords: PACS. 89.65.Gh Economics; business; and financial markets – 05.40.Fb Random walks and Lévy flights (search for similar items in EconPapers)
Date: 2001
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Citations: View citations in EconPapers (13)

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DOI: 10.1007/PL00022987

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