Fractal Character Index Study In China Market

In the last forty years, Efficient Market Hypothesis has been the core proposition. When we tracing its developing approach, we find many of definitions of it. In the normal, people always use the definition by Fama, which says:Efficient financial market is such market, in witch its bonds' prices always affect the information that we can gotten. In another way, Fama still put forwards the three types of efficient Market based on classifying information about assets pricing by Roberts, there are weak-strong efficient market, semi-strong efficient market and strong efficient market.For the linear essence of Efficient Market Hypothesis, it always has been worried by its test. In the first instance, empirical results were able to match the Efficient Market Hypothesis by and large, but in the 1970s, Efficient Market Hypothesis has been gaining more and more challenge which not only from the theory but also from the empirical research. There are, especially, many of abnormals, such as choas theory, catastrophe theory, behavior finance theory, coherent market theory and the fractal market theory, which let researchers taking more attention more about the use of non-linear theory in financial market.The Fractal Market Hypothesis has five main ideas. Firstly, the Fractal Market Hypothesis think the capital market as a feedback system, which has longtime correlation and trend. Secondly, system has a critical level. At the critical level, the quality of system shall change, it can be forked and gotten not only one equilibrium state. In another way, system may be from stable state to foul-up one, and gained the irregular state. Thirdly, for bond price and bond return rate are following by Fractal distribution, we can evaluate bond market's volatility and equal cycle by The Fractal Market Hypothesis. fourthly, capital market is an market apart from equilibrium condition, it actually is such a market that repeated by random noise. Fifthly, for depended on original condition, the input and output of system repeated and repeated continually, so, any different of original condition should be magnified in exponential way, or for the system's randomicity, the system forget the former data.In our paper, researching on the index of both shanghai and shengzhen bond market from 4th, 1994 to 4th, 2004 , we find that our bond market has obvious fractal character, and working out the Hurst index and Lyapunov index, which prove that our bond market can been test by non-linear theory.