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Study on the Non-Random and Chaotic Behavior of Chinese Equities Market

Author

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  • Patrick K. K. Chu

    (Faculty of Business Administration, University of Macau, Macao SAR, China)

Abstract

After the stock market crash of October 19, 1987, interest in nonlinear dynamics and chaotic dynamics have increased in the field of financial analysis. The extent that the daily return data from the Shanghai Stock Exchange Index and the Shenzhen Stock Exchange Index exhibit non-random, nonlinear and chaotic characteristics are investigated by employing various tests from chaos theory. The Hurst exponent in R/S analysis rejects the hypothesis that the index return series are random, independent and identically distributed. The BDS test provides evidence for nonlinearity. The estimated correlation dimensions provide evidence for deterministic chaotic behaviors.

Suggested Citation

  • Patrick K. K. Chu, 2003. "Study on the Non-Random and Chaotic Behavior of Chinese Equities Market," Review of Pacific Basin Financial Markets and Policies (RPBFMP), World Scientific Publishing Co. Pte. Ltd., vol. 6(02), pages 199-222.
    • Handle: RePEc:wsi:rpbfmp:v:06:y:2003:i:02:n:s0219091503001055
    DOI: 10.1142/S0219091503001055
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    Cited by:

    1. Iseri, Müge & Caglar, Hikmet & Caglar, Nazan, 2008. "A model proposal for the chaotic structure of Istanbul stock exchange," Chaos, Solitons & Fractals, Elsevier, vol. 36(5), pages 1392-1398.

    More about this item

    Keywords

    Chaos theory; rescaled range analysis; Hurst exponent; BDS test; correlation dimension estimation; Shenzhen Stock Exchange; Shanghai Stock Exchange;
    All these keywords.

    JEL classification:

    • G1 - Financial Economics - - General Financial Markets
    • G2 - Financial Economics - - Financial Institutions and Services
    • G3 - Financial Economics - - Corporate Finance and Governance

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