Power law in market capitalization during Dot-com and Shanghai bubble periods

Takayuki Mizuno, Takaaki Ohnishi and Tsutomu Watanabe

No 60, HIT-REFINED Working Paper Series from Institute of Economic Research, Hitotsubashi University

Abstract: The distributions of market capitalization in the NASDAQ and Shanghai stock exchanges from 1990 to 2015 have a fat upper tail that follows a power law function. The power law index, which fluctuates around one depending on the economic conditions, became small during the dot-com and Shanghai bubble periods. By using the regression coefficient of random forests for market capitalization and income statement items, we found that net assets are most reflected in market capitalization for companies listed in NASDAQ. The distribution of the price book-value ratio (PBR), which is defined as market capitalization divided by net assets, also got fat during the bubble periods. These results suggest that speculative money was excessively concentrated on specific stocks during such periods.

Keywords: Power law; Zipf's law; Market capitalization; Asset bubble; Stock market; Econophysics; PACS:G010; PACS:D300 (search for similar items in EconPapers)
Pages: 10 pages
Date: 2016-07
New Economics Papers: this item is included in nep-pay
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Citations: View citations in EconPapers (2)

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