An Empirical Study On Fractal Characteristics In Shanghai And Shenzhen Stock Markets

Although based on the efficient market hypothesis(EMH),most of modern financial markets are not efficient enough to meet all the strict assumptions.EMH is incapable of explaining lots of abnormal phenomena of finance market,such as January effect,weekend effect and so on.Therefore the status of EMH has being challenged.With the rapid development of the nonlinear science,the fractal theory and chaotic theory have become the current trends in financial Theoretical study.The development of the fractal theory established Fractal market theory(FMT) which conforms to the real market better and broke through those strict assumptions of EMH,which is entirely rational investors,independence,normality,linearity,etc.Fractal market theory,which seems more reality than EMH,can better explain the phenomena in finance market.This study use the latest data of Shanghai Stock Exchange composite index and Shenzhen component index to do empirical research to discuss the fractal structure in Chinese stock market.With fractal theory,the two markets have been confirmed to be typical fractal markets.Firstly,Shanghai and Shenzhen stock return time series do not follow normal distribution,it presents leptokurtic and fat-tails;secondly,it is characteristic of long memory,non-linear,persistence and Non-periodic Cycle,which are obviously fractal market Features;finally,we discuss the chaotic dynamic characteristics of tow market,witch can prove the fact of fractal market from the side.Through the description of the fractal features of the Shanghai and Shenzhen stock markets,they are proved to be predictable to some extent.Therefore it is feasible for Relevant departments to make policy to influence the stock market and for investors to predict price.