Economy – Quantitative Finance – Statistical Finance
Scientific paper
2010-03-31
Phys. Rev. E 82, 066103 (2010)
Economy
Quantitative Finance
Statistical Finance
6 RevTex 4-1 pages, 7 eps figures, 1 table
Scientific paper
10.1103/PhysRevE.82.066103
There is convincing evidence showing that the probability distributions of stock returns in mature markets exhibit power-law tails and both the positive and negative tails conform to the inverse cubic law. It supports the possibility that the tail exponents are universal at least for mature markets in the sense that they do not depend on stock market, industry sector, and market capitalization. We investigate the distributions of one-minute intraday returns of all the A-share stocks traded in the Chinese stock market, which is the largest emerging market in the world. We find that the returns can be well fitted by the $q$-Gaussian distribution and the tails have power-law relaxations with the exponents fluctuating around $\alpha=3$ and being well outside the L\'evy stable regime for individual stocks. We provide statistically significant evidence showing that the exponents logarithmically decrease with the turnover rate and increase with the market capitalization, and find that the market capitalization has a greater impact on the tail exponent than the turnover rate. Our findings indicate that the intraday return distributions are not universal in emerging stock markets.
Mu Guo-Hua
Zhou Wei-Xing
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