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Quantifying financial market dynamics: Scaling law in rank mobility of Chinese stock prices

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  • Shi, Yongbin
  • Yu, Miao
  • Chen, Liujun
  • Ivanov, Plamen Ch.
  • Wang, Yougui

Abstract

Rank mobility, which was designed to measure the average variation of relative rank positions with respect to any absolute variable over a given time period, can be used to explore how the memory of stock price ranking orders fades over time. We investigate the variations in rank order of the closing prices of stocks registered at the Shanghai A-share market over a long period of 16 years. And we find that rank mobility increases as a power law with increasing time scale, and eventually converges to a constant level. This power-law relationship can be observed not only over a long period of 16 years but also for each consecutive year, especially their power-law exponents are very close. The empirical evidence indicates a fundamental dynamics of Chinese stock price movements.

Suggested Citation

  • Shi, Yongbin & Yu, Miao & Chen, Liujun & Ivanov, Plamen Ch. & Wang, Yougui, 2021. "Quantifying financial market dynamics: Scaling law in rank mobility of Chinese stock prices," Finance Research Letters, Elsevier, vol. 38(C).
    • Handle: RePEc:eee:finlet:v:38:y:2021:i:c:s154461231931308x
    DOI: 10.1016/j.frl.2020.101516
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    References listed on IDEAS

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    More about this item

    Keywords

    Rank mobility; Stock price co-movement; Stock price dynamics; Firm-specific information; Power law;
    All these keywords.

    JEL classification:

    • C58 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Financial Econometrics
    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
    • I32 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Measurement and Analysis of Poverty

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