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Scaling power laws in the Sao Paulo Stock Exchange

Author

Listed:
  • Sergio Da Silva

    (Department of Economics, University of Brasilia)

  • Raul Matsushita

    (Department of Statistics, University of Brasilia)

  • Iram Gleria

    (Department of Physics, Catholic University of Brasilia)

Abstract

The scaling of the probability distribution of the Sao Paulo Stock Exchange index is shown to be described by a Levy stable stochastic process for the modal region of the distribution. Data refer to daily records for the 30-year period 1968-1998. The truncated Levy process is characterized by a scaling index of 1.66. Scaling power laws are also shown to be present in the mean and standard deviation of the series as the time horizon is increased. A power law is also found for the autocorrelation time of the natural logs of the index series. The deviations from the line that best fits the natural logs of the series are also found to be short range autocorrelated and to follow an exponential decay.

Suggested Citation

  • Sergio Da Silva & Raul Matsushita & Iram Gleria, 2002. "Scaling power laws in the Sao Paulo Stock Exchange," Economics Bulletin, AccessEcon, vol. 7(3), pages 1-12.
    • Handle: RePEc:ebl:ecbull:eb-02g10002
    as

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    File URL: http://www.accessecon.com/pubs/EB/2002/Volume7/EB-02G10002A.pdf
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    References listed on IDEAS

    as
    1. Andrew W. Lo, A. Craig MacKinlay, 1988. "Stock Market Prices do not Follow Random Walks: Evidence from a Simple Specification Test," The Review of Financial Studies, Society for Financial Studies, vol. 1(1), pages 41-66.
    2. Miranda, L.Couto & Riera, R., 2001. "Truncated Lévy walks and an emerging market economic index," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 297(3), pages 509-520.
    Full references (including those not matched with items on IDEAS)

    Citations

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    Cited by:

    1. Matsushita, Raul & Rathie, Pushpa & Da Silva, Sergio, 2003. "Exponentially damped Lévy flights," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 326(3), pages 544-555.
    2. Pan, Raj Kumar & Sinha, Sitabhra, 2008. "Inverse-cubic law of index fluctuation distribution in Indian markets," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 387(8), pages 2055-2065.
    3. Annibal Figueiredo & Iram Gleria & Raul Matsushita & Sergio Da Silva, 2004. "On the origins of truncated Lévy flights," Finance 0404013, University Library of Munich, Germany.
    4. De Domenico, Federica & Livan, Giacomo & Montagna, Guido & Nicrosini, Oreste, 2023. "Modeling and simulation of financial returns under non-Gaussian distributions," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 622(C).
    5. Matsushita, Raul & Da Silva, Sergio & Da Fonseca, Regina & Nagata, Mateus, 2020. "Bypassing the truncation problem of truncated Lévy flights," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 559(C).
    6. repec:ebl:ecbull:v:7:y:2007:i:1:p:1-11 is not listed on IDEAS
    7. Federica De Domenico & Giacomo Livan & Guido Montagna & Oreste Nicrosini, 2023. "Modeling and Simulation of Financial Returns under Non-Gaussian Distributions," Papers 2302.02769, arXiv.org.
    8. Matsushita, Raul & Gleria, Iram & Figueiredo, Annibal & Rathie, Pushpa & Da Silva, Sergio, 2004. "Exponentially damped Lévy flights, multiscaling, and exchange rates," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 333(C), pages 353-369.
    9. Sergio Da Silva & Annibal Figueiredo & Iram Gleria & Raul Matsushita, 2007. "Hurst exponents, power laws, and efficiency in the Brazilian foreign exchange market," Economics Bulletin, AccessEcon, vol. 7(1), pages 1-11.
    10. Sergio Da Silva, 2004. "International Finance, Levy Distributions, and the Econophysics of Exchange Rates," International Finance 0405018, University Library of Munich, Germany.
    11. Mercik, Szymon & Weron, Rafal, 2002. "Origins of scaling in FX markets," MPRA Paper 2294, University Library of Munich, Germany.
    12. Figueiredo, Annibal & Gleria, Iram & Matsushita, Raul & Da Silva, Sergio, 2003. "Autocorrelation as a source of truncated Lévy flights in foreign exchange rates," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 323(C), pages 601-625.

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    Keywords

    complex systems;

    JEL classification:

    • G1 - Financial Economics - - General Financial Markets

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