| CROSS-DISCIPLINARY PHYSICS AND RELATED AREAS OF SCIENCE AND TECHNOLOGY |
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Formation Mechanism of the Accumulative Magnification Effect in a Financial Time Series |
| DUAN Wen-Qi** |
College of Economics and Management, Zhejiang Normal University, Jinhua 321004
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| Cite this article: |
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DUAN Wen-Qi 2012 Chin. Phys. Lett. 29 038903 |
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Abstract Structural information contained in financial time series can be magnified effectively by constructing the accumulative return. In order to make the magnification effects of different financial time series comparative, we first propose a standard method to characterize the strength of the accumulative magnification effect. Then, we employ decomposed-randomized technology to uncover the formation mechanism of the accumulative magnification effect. Our results show that (1) the standard deviation pattern is determined by volatility dependence, (2) the Hurst exponent pattern is induced by sign dependence, (3) an approximate entropy pattern is caused by the combined effect of sign dependence and volatility dependence.
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| Keywords:
89.65.Gh
05.40.-a
89.75.-k
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Received: 19 August 2011
Published: 11 March 2012
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| PACS: |
89.65.Gh
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(Economics; econophysics, financial markets, business and management)
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05.40.-a
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(Fluctuation phenomena, random processes, noise, and Brownian motion)
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89.75.-k
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(Complex systems)
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