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Nonlinear Fluctuation Behavior of Financial Time Series Model by Statistical Physics System

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  • Wuyang Cheng
  • Jun Wang

Abstract

We develop a random financial time series model of stock market by one of statistical physics systems, the stochastic contact interacting system. Contact process is a continuous time Markov process; one interpretation of this model is as a model for the spread of an infection, where the epidemic spreading mimics the interplay of local infections and recovery of individuals. From this financial model, we study the statistical behaviors of return time series, and the corresponding behaviors of returns for Shanghai Stock Exchange Composite Index (SSECI) and Hang Seng Index (HSI) are also comparatively studied. Further, we investigate the Zipf distribution and multifractal phenomenon of returns and price changes. Zipf analysis and MF‐DFA analysis are applied to investigate the natures of fluctuations for the stock market.

Suggested Citation

  • Wuyang Cheng & Jun Wang, 2014. "Nonlinear Fluctuation Behavior of Financial Time Series Model by Statistical Physics System," Abstract and Applied Analysis, John Wiley & Sons, vol. 2014(1).
    • Handle: RePEc:wly:jnlaaa:v:2014:y:2014:i:1:n:806271
    DOI: 10.1155/2014/806271
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    References listed on IDEAS

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    1. Giulia Iori, 2000. "A Threshold Model For Stock Return Volatility And Trading Volume," International Journal of Theoretical and Applied Finance (IJTAF), World Scientific Publishing Co. Pte. Ltd., vol. 3(03), pages 467-472.
    2. Laurent E. Calvet & Adlai Fisher, 2008. "Multifractal Volatility: Theory, Forecasting and Pricing," Post-Print hal-00671877, HAL.
    3. Anqi Pei & Jun Wang, 2013. "Nonlinear Analysis of Return Time Series Model by Oriented Percolation Dynamic System," Abstract and Applied Analysis, John Wiley & Sons, vol. 2013(1).
    4. Wen Fang & Jun Wang, 2012. "Statistical Properties And Multifractal Behaviors Of Market Returns By Ising Dynamic Systems," International Journal of Modern Physics C (IJMPC), World Scientific Publishing Co. Pte. Ltd., vol. 23(03), pages 1-14.
    5. Stanislaw Drozdz & Jaroslaw Kwapien & Pawel Oswiecimka & Rafal Rak, 2010. "The foreign exchange market: return distributions, multifractality, anomalous multifractality and Epps effect," Papers 1011.2385, arXiv.org.
    6. Fang, Wen & Wang, Jun, 2013. "Fluctuation behaviors of financial time series by a stochastic Ising system on a Sierpinski carpet lattice," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 392(18), pages 4055-4063.
    7. Black, Fischer & Scholes, Myron S, 1973. "The Pricing of Options and Corporate Liabilities," Journal of Political Economy, University of Chicago Press, vol. 81(3), pages 637-654, May-June.
    8. Anqi Pei & Jun Wang, 2013. "Nonlinear Analysis of Return Time Series Model by Oriented Percolation Dynamic System," Abstract and Applied Analysis, Hindawi, vol. 2013, pages 1-12, October.
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    Cited by:

    1. Wei Deng & Jun Wang, 2014. "Nonlinear Behaviors of Tail Dependence and Cross‐Correlation of Financial Time Series Model," Abstract and Applied Analysis, John Wiley & Sons, vol. 2014(1).

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