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Scaling characteristics in the Taiwan stock market

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  • Ho, Ding-Shun
  • Lee, Chung-Kung
  • Wang, Cheng-Cai
  • Chuang, Mang

Abstract

Some statistical tools, including histogram, spectral analysis and fractal theory, were used on the daily Taiwan stock price index (TSPI) from 1987 to 2002 to examine the possible scale-invariant behavior and the clustering characteristics in Taiwan stock market. It was found that the TSPI data exhibited the characteristic of right-skewed frequency distribution. The long-term memory and the possibility of scale invariance were roughly identified through the analysis of autocorrelation and power spectrum, respectively. The monofractal analysis was then performed by the box-counting method. Scale invariance was clearly found in the time series and the box dimension was shown to be a decreasing function of the threshold index level, implying multifractal characteristics, i.e., the low and high regions scale differently. To test this hypothesis, the time series were transferred into a useful compact form through the multifractal formalism, namely, the τ(q)–q and f(α)–α plots. The analysis confirmed the existence of multifractal characteristics in the investigated time series. The origin of multifractal phenomena in Taiwan stock market might be interpreted in terms of the multiplicative cascade process of stock market information.

Suggested Citation

  • Ho, Ding-Shun & Lee, Chung-Kung & Wang, Cheng-Cai & Chuang, Mang, 2004. "Scaling characteristics in the Taiwan stock market," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 332(C), pages 448-460.
  • Handle: RePEc:eee:phsmap:v:332:y:2004:i:c:p:448-460
    DOI: 10.1016/j.physa.2003.10.023
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    References listed on IDEAS

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    1. Luintel, Kul B. & Khan, Mosahid & Leon-Gonzalez, Roberto & Li, Guangjie, 2016. "Financial development, structure and growth: New data, method and results," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 43(C), pages 95-112.
    2. Yuan, Ying & Zhuang, Xin-tian & Jin, Xiu & Huang, Wei-qiang, 2014. "Stable distribution and long-range correlation of Brent crude oil market," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 413(C), pages 173-179.
    3. Zhuang, Xiaoyang & Wei, Yu & Zhang, Bangzheng, 2014. "Multifractal detrended cross-correlation analysis of carbon and crude oil markets," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 399(C), pages 113-125.
    4. Stavroyiannis, S. & Makris, I. & Nikolaidis, V., 2010. "Non-extensive properties, multifractality, and inefficiency degree of the Athens Stock Exchange General Index," International Review of Financial Analysis, Elsevier, vol. 19(1), pages 19-24, January.
    5. Gao, Lei & Guo, Jin-Li & Fan, Chao & Liu, Xue-Jiao, 2013. "Individual and group dynamics in purchasing activity," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 392(2), pages 343-349.
    6. Zunino, L. & Tabak, B.M. & Figliola, A. & Pérez, D.G. & Garavaglia, M. & Rosso, O.A., 2008. "A multifractal approach for stock market inefficiency," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 387(26), pages 6558-6566.
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    8. Lee, Chung Kung & Chin Yu, Chung & Cai Wang, Cheng & Der Hwang, Ruey & Kuen Yu, Guey, 2006. "Scaling characteristics in aftershock sequence of earthquake," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 371(2), pages 692-702.
    9. Joost Bats & Aerdt Houben, 2017. "Bank-based versus market-based financing: implications for systemic risk," DNB Working Papers 577, Netherlands Central Bank, Research Department.
    10. repec:asi:ijoass:2017:p:818-838 is not listed on IDEAS
    11. Jiang, Zhi-Qiang & Zhou, Wei-Xing, 2008. "Multifractal analysis of Chinese stock volatilities based on the partition function approach," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 387(19), pages 4881-4888.
    12. Du, Guoxiong & Ning, Xuanxi, 2008. "Multifractal properties of Chinese stock market in Shanghai," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 387(1), pages 261-269.

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