Study of Characteristic and Period of Communication and Electronics Industry in Chinese Securities Market

Article excerpt

Abstract

Purpose: This study aims to analyze the characteristics of communication and electronics industry in Chinese stock market and calculate the average periods of it.

Design/methodology/approach: We use R/S analysis method to study the characteristics of communication and electronics industry in Chinese stock market, and use Matlab software and Eviews software to calculate some representative exponents of this industry.

Findings: The results show that the probability distribution of the communication and electronics industry in the Chinese stock market is nearly non-normal distribution, but a partial distribution, showing a peak, thick tail, migraine and other features. Hurst exponent calculated shows that the communication and electronics industry in the Chinese stock market has obvious fractal characteristics, and does not follow a random walk assumption, but follows persistent trend. The average big circulation period is about 400 days; the average small circulation period is about 200 days.

Research limitations/implications: We use R/S analysis method to study the characteristics including periods and venture.of communication and electronics industry in Chinese stock market.

Practical implications: The average periods and related venture can give investors properly suggestions.

Originality/Value: We use R/S analysis method and Matlab software and Eviews software to analyze the characteristics of communication and electronics industry in Chinese stock market which has barely been studied. The results unfold the characteristics of this industry and can give investors properly suggestions as well.

Key Words: Stock market; Fractal; R/S analysis; Hurst exponent; Periods; Communication and electronics

(ProQuest: ... denotes formulae omitted.)

INTRODUCTION

As one of the cornerstones of Modern Finance, Efficient Market Hypothesis(EMH) has always been the theoretical premise of capital markets analysis.

EMH theory suggests: The current market price of capital markets can reflect all the relevant information timely, accurately and adequately. Investors are rational, and they will respond to the information with a nonlinear manner. The process of price changes follows the Markov Process which is a random wandering process, and the probability distribution of the price changes yield follows normal distribution. However, recently many domestic and foreign empirical researches on capital markets discover that EMH theory cannot explain many of the actual situations in the capital markets. The fundamental reason is that the real capital market is a complicated system, and it's not as the EMH theory which reflects information based on the linear paradigm. Instead, it's a nonlinear reaction and the price returns is not mutually independent. Its changes do not follow random wandering model and the probability distribution also closes to nonnormal distribution. Instead, it's a skewed distribution which represents characteristic like peaks, fat tail, biased, etc. More and more practices prove that modern capital market theory which based on efficient market hypothesis does not match with the actual situation, and the fractal theory takes into account the complexity of the capital market and the defects of the EMH. By non-linear paradigm as the basis analysis, it can explain many market situations which efficient market hypothesis cannot explain. It also provides a new idea and method for more in-depth analysis of the capital market.

In recent decades, rapid economic development in China is along with the continued progress and application of high technology. The electronic information industry is gradually revealing a powerful development momentum and has been the pillar industry of national economy. However, China's electronic information industry is mainly in the processing and does not form an industrial development pattern of large enterprises leading with SMEs supporting. …