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Non-linear characterization and trend identification of liquidity in China's new OTC stock market based on multifractal detrended fluctuation analysis

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  • Yan, Ruzhen
  • Yue, Ding
  • Chen, Xudong
  • Wu, Xu

Abstract

We investigate the non-linear characterization of market liquidity in the new Over-the-Counter(OTC) stock market through the multifractal detrended fluctuation analysis (MF-DFA), analyze the sources of liquidity's non-linear and go further to identify the trended fluctuations by tendency entropy dimension. We find that the liquidity of the new OTC stock market has not only non-linear characterization but also multifractal characterization, the generalized Hurst exponent depends on the liquidity of fluctuation and changes with the order, but the multifractal degree of liquidity is lower than that of the large-cap stock market. We compare the MF-DFA results of the original and shuffled series, find that the related multifractality and distributed multifractality are the sources of liquidity multifractality. The trended fluctuations of liquidity can be efficiently identified by the tendency entropy dimension method. These results of the paper will provide an important theoretical basis for liquidity prediction research.

Suggested Citation

  • Yan, Ruzhen & Yue, Ding & Chen, Xudong & Wu, Xu, 2020. "Non-linear characterization and trend identification of liquidity in China's new OTC stock market based on multifractal detrended fluctuation analysis," Chaos, Solitons & Fractals, Elsevier, vol. 139(C).
    • Handle: RePEc:eee:chsofr:v:139:y:2020:i:c:s0960077920304604
    DOI: 10.1016/j.chaos.2020.110063
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    More about this item

    Keywords

    Liquidity; Multifractal detrended fluctuation analysis; Tendency entropy dimension; The new OTC stock market;
    All these keywords.

    JEL classification:

    • C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Prediction Models; Simulation Methods
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading

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