IDEAS home Printed from https://ideas.repec.org/a/eee/phsmap/v471y2017icp1-9.html
   My bibliography  Save this article

The high order dispersion analysis based on first-passage-time probability in financial markets

Author

Listed:
  • Liu, Chenggong
  • Shang, Pengjian
  • Feng, Guochen

Abstract

The study of first-passage-time (FPT) event about financial time series has gained broad research recently, which can provide reference for risk management and investment. In this paper, a new measurement–high order dispersion (HOD)–is developed based on FPT probability to explore financial time series. The tick-by-tick data of three Chinese stock markets and three American stock markets are investigated. We classify the financial markets successfully through analyzing the scaling properties of FPT probabilities of six stock markets and employing HOD method to compare the differences of FPT decay curves. It can be concluded that long-range correlation, fat-tailed broad probability density function and its coupling with nonlinearity mainly lead to the multifractality of financial time series by applying HOD method. Furthermore, we take the fluctuation function of multifractal detrended fluctuation analysis (MF-DFA) to distinguish markets and get consistent results with HOD method, whereas the HOD method is capable of fractionizing the stock markets effectively in the same region. We convince that such explorations are relevant for a better understanding of the financial market mechanisms.

Suggested Citation

  • Liu, Chenggong & Shang, Pengjian & Feng, Guochen, 2017. "The high order dispersion analysis based on first-passage-time probability in financial markets," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 471(C), pages 1-9.
    • Handle: RePEc:eee:phsmap:v:471:y:2017:i:c:p:1-9
    DOI: 10.1016/j.physa.2016.11.045
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0378437116308500
    Download Restriction: Full text for ScienceDirect subscribers only. Journal offers the option of making the article available online on Science direct for a fee of $3,000
    File URL: https://libkey.io/10.1016/j.physa.2016.11.045?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Stanislaw Drozdz & Jaroslaw Kwapien & Pawel Oswiecimka & Rafal Rak, 2009. "Quantitative features of multifractal subtleties in time series," Papers 0907.2866, arXiv.org, revised Feb 2010.
    2. Fuentes, M.A. & Wio, Horacio S. & Toral, Raúl, 2002. "Effective Markovian approximation for non-Gaussian noises: a path integral approach," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 303(1), pages 91-104.
    3. Josep Perell'o & Mario Guti'errez-Roig & Jaume Masoliver, 2011. "Scaling properties and universality of first-passage time probabilities in financial markets," Papers 1107.1174, arXiv.org, revised Sep 2011.
    4. Zhou, Wei-Xing, 2012. "Finite-size effect and the components of multifractality in financial volatility," Chaos, Solitons & Fractals, Elsevier, vol. 45(2), pages 147-155.
    5. Kantelhardt, Jan W. & Zschiegner, Stephan A. & Koscielny-Bunde, Eva & Havlin, Shlomo & Bunde, Armin & Stanley, H.Eugene, 2002. "Multifractal detrended fluctuation analysis of nonstationary time series," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 316(1), pages 87-114.
    6. Kwapień, J. & Oświe¸cimka, P. & Drożdż, S., 2005. "Components of multifractality in high-frequency stock returns," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 350(2), pages 466-474.
    7. Wei Li & Fengzhong Wang & Shlomo Havlin & H. Eugene Stanley, 2011. "Financial factor influence on scaling and memory of trading volume in stock market," Papers 1106.1415, arXiv.org.
    8. Sadegh Movahed, M. & Hermanis, Evalds, 2008. "Fractal analysis of river flow fluctuations," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 387(4), pages 915-932.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Marcin Wk{a}torek & Stanis{l}aw Dro.zd.z & Jaros{l}aw Kwapie'n & Ludovico Minati & Pawe{l} O'swik{e}cimka & Marek Stanuszek, 2020. "Multiscale characteristics of the emerging global cryptocurrency market," Papers 2010.15403, arXiv.org, revised Mar 2021.
    2. Li, Xing, 2021. "On the multifractal analysis of air quality index time series before and during COVID-19 partial lockdown: A case study of Shanghai, China," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 565(C).
    3. Lee, Hojin & Chang, Woojin, 2015. "Multifractal regime detecting method for financial time series," Chaos, Solitons & Fractals, Elsevier, vol. 70(C), pages 117-129.
    4. Rodriguez-Romo, Suemi & Sosa-Herrera, Antonio, 2013. "Lacunarity and multifractal analysis of the large DLA mass distribution," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 392(16), pages 3316-3328.
    5. Gui, Jun & Zheng, Zeyu & Fu, Dianzheng & Fu, Yang & Liu, Zhi, 2021. "Long-term correlations and multifractality of toll-free calls in China," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 567(C).
    6. Choi, Sun-Yong, 2021. "Analysis of stock market efficiency during crisis periods in the US stock market: Differences between the global financial crisis and COVID-19 pandemic," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 574(C).
    7. Cao, Guangxi & Xu, Wei, 2016. "Nonlinear structure analysis of carbon and energy markets with MFDCCA based on maximum overlap wavelet transform," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 444(C), pages 505-523.
    8. Wu, Liang & Chen, Lei & Ding, Yiming & Zhao, Tongzhou, 2018. "Testing for the source of multifractality in water level records," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 508(C), pages 824-839.
    9. López, J.L. & Veleva, L., 2022. "2D-DFA as a tool for non-destructive characterisation of copper surface exposed to substitute ocean water," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 586(C).
    10. Li Wang & Xing-Lu Gao & Wei-Xing Zhou, 2023. "Testing For Intrinsic Multifractality In The Global Grain Spot Market Indices: A Multifractal Detrended Fluctuation Analysis," FRACTALS (fractals), World Scientific Publishing Co. Pte. Ltd., vol. 31(07), pages 1-24.
    11. Kristjanpoller, Werner & Nekhili, Ramzi & Bouri, Elie, 2024. "Blockchain ETFs and the cryptocurrency and Nasdaq markets: Multifractal and asymmetric cross-correlations," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 637(C).
    12. Schadner, Wolfgang, 2022. "U.S. Politics from a multifractal perspective," Chaos, Solitons & Fractals, Elsevier, vol. 155(C).
    13. Zhan, Cun & Liang, Chuan & Zhao, Lu & Jiang, Shouzheng & Niu, Kaijie & Zhang, Yaling, 2023. "Multifractal characteristics of multiscale drought in the Yellow River Basin, China," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 609(C).
    14. Li, Tingyi & Xue, Leyang & Chen, Yu & Chen, Feier & Miao, Yuqi & Shao, Xinzeng & Zhang, Chenyi, 2018. "Insights from multifractality analysis of tanker freight market volatility with common external factor of crude oil price," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 505(C), pages 374-384.
    15. Siokis, Fotios M., 2014. "European economies in crisis: A multifractal analysis of disruptive economic events and the effects of financial assistance," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 395(C), pages 283-292.
    16. Gao, Xing-Lu & Shao, Ying-Hui & Yang, Yan-Hong & Zhou, Wei-Xing, 2022. "Do the global grain spot markets exhibit multifractal nature?," Chaos, Solitons & Fractals, Elsevier, vol. 164(C).
    17. F. Cavalli & A. Naimzada & N. Pecora & M. Pireddu, 2021. "Market sentiment and heterogeneous agents in an evolutive financial model," Journal of Evolutionary Economics, Springer, vol. 31(4), pages 1189-1219, September.
    18. Chen, Shu-Peng & He, Ling-Yun, 2010. "Multifractal spectrum analysis of nonlinear dynamical mechanisms in China’s agricultural futures markets," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 389(7), pages 1434-1444.
    19. Meo, Marcos M. & Iaconis, Francisco R. & Del Punta, Jessica A. & Delrieux, Claudio A. & Gasaneo, Gustavo, 2024. "Multifractal information on reading eye tracking data," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 638(C).
    20. Dutta, Srimonti & Ghosh, Dipak & Samanta, Shukla, 2014. "Multifractal detrended cross-correlation analysis of gold price and SENSEX," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 413(C), pages 195-204.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:phsmap:v:471:y:2017:i:c:p:1-9. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.journals.elsevier.com/physica-a-statistical-mechpplications/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.