Analysis Of The Application Fractal Theory And Effect On China's Security Market

The purpose of people invest in stocks market is to win profit, but the profits and risks are twins. It is difficult to find a balance between profit and risk. The traditional theory of stocks market asserts the stock markets are efficient and stable. The profit is a linear function of risk and the variable of profit is Brownian motion which distribution is independent identically whose expected value and variance are stable. But it isn't true in our true world. The effected factors of stocks market and the relations among these factors are complex and interfered by many elements. The function of profits and risks is unlinear unequilibrium selfcorrelation and unstable. The variable of profit is fractal Brownian motion which have the feature of fractal and chaos.In this paper, I challenge the EMH by analyzing the process of stocks market in China and its traits. From the analysis of the R/S and V statistic, we find it show off the feature of fractal and chaos. By the statistics analysis , we find these traits are remarkable. Obviously, EMH could not make a better explain to stocks market of ChinaIn the end of this paper, From the changing of Hurst exponent (H) after 1997, we find the variation of price of it shows more and more complex with the strict managed by government. So it is more and more difficult for personal investor to investment and they have to conform to the greater risks. Obviously, the variations of two stocks market of China should be similar because they face the same reasons, I prove it by the similar variation trend of Hurst exponent of them.