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Viscoelastic behavior of stock indices

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  • Gündüz, Güngör
  • Gündüz, Yalin

Abstract

The scattering diagram of a stock index results in a complex network structure, which can be used to analyze the viscoelastic properties of the index. The change along x- or y-direction of the diagram corresponds to purely elastic (or spring like) movement whereas the diagonal change at an angle of 45° corresponds to purely viscous (or dashpot like) movement. The viscous component pushes the price from its current value to any other value, while the elastic component acts like a restoring force. Four indices, namely, DJI, S&P-500, NASDAQ-100, and NASDAQ-composite were studied for the period of 2001–2009. NASDAQ-composite displayed very high elasticity while NASDAQ-100 displayed the highest fluidity in the time period considered. The fluidity of DJI and S&P-500 came out to be close to each other, and they are almost the same in the second half of the period.

Suggested Citation

  • Gündüz, Güngör & Gündüz, Yalin, 2010. "Viscoelastic behavior of stock indices," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 389(24), pages 5776-5784.
    • Handle: RePEc:eee:phsmap:v:389:y:2010:i:24:p:5776-5784
    DOI: 10.1016/j.physa.2010.09.010
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    References listed on IDEAS

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    1. Chiarella, Carl & He, Xue-Zhong & Hommes, Cars, 2006. "Moving average rules as a source of market instability," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 370(1), pages 12-17.
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