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Inflation and deflation in financial markets

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  • Kaizoji, Taisei

Abstract

The aim of this paper is to show new empirical results on the statistical properties of absolute log returns, defined as the absolute value of the log return, in a stock market. We used the daily data of the Nikkei 225 index of the 28-year period from January of 1975 to December of 2002, and compared the statistical properties of the return and absolute log returns in the inflationary (bubble) period with those in the deflationary (anti-bubble) period. Our results show that the distribution of absolute log returns is approximated by the q-exponential distribution where q=1.14, that is, a power-law distribution, in the inflationary period from January of 1975 to December of 1989, and it is accurately described by the q-exponential distribution where q=1, that is, an exponential distribution, in the deflationary period from January of 1990 to December of 2002.

Suggested Citation

  • Kaizoji, Taisei, 2004. "Inflation and deflation in financial markets," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 343(C), pages 662-668.
    • Handle: RePEc:eee:phsmap:v:343:y:2004:i:c:p:662-668
    DOI: 10.1016/j.physa.2004.06.137
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    References listed on IDEAS

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    1. Kaizoji, Taisei & Kaizoji, Michiyo, 2004. "A mechanism leading from bubbles to crashes: the case of Japan's land market," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 344(1), pages 138-141.
    2. Yanhui Liu & Parameswaran Gopikrishnan & Pierre Cizeau & Martin Meyer & Chung-Kang Peng & H. Eugene Stanley, 1999. "The statistical properties of the volatility of price fluctuations," Papers cond-mat/9903369, arXiv.org, revised Mar 1999.
    3. Kaizoji, Taisei & Kaizoji, Michiyo, 2004. "Power law for ensembles of stock prices," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 344(1), pages 240-243.
    4. Kaizoji, Taisei & Kaizoji, Michiyo, 2004. "Power law for the calm-time interval of price changes," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 336(3), pages 563-570.
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    Cited by:

    1. Taisei Kaizoji, 2005. "Comparison of volatility distributions in the periods of booms and stagnations: an empirical study on stock price indices," Papers physics/0506114, arXiv.org.
    2. Martins, Francisco Leonardo Bezerra & do Nascimento, José Cláudio, 2022. "Power law dynamics in genealogical graphs," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 596(C).
    3. Taisei Kaizoji & Michiyo Kaizoji, 2003. "Empirical Laws Of A Stock Price Index And A Stochastic Model," Advances in Complex Systems (ACS), World Scientific Publishing Co. Pte. Ltd., vol. 6(03), pages 303-312.

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