dorsal/arxiv
View SchemaDiffusion entropy analysis on the scaling behavior of financial markets
| Authors | Shi-Min Cai, Pei-Ling Zhou, Hui-Jie Yang, Chun-Xia Yang, Bing-Hong Wang, Tao Zhou |
|---|---|
| Categories | |
| ArXiv ID | physics/0508117 |
| URL | https://arxiv.org/abs/physics/0508117 |
| DOI | 10.1016/j.physa.2005.12.004 |
| Journal | Phyisca A 367: 337-344 (2006) |
Abstract
In this paper the diffusion entropy technique is applied to investigate the scaling behavior of financial markets. The scaling behaviors of four representative stock markets, Dow Jones Industrial Average, Standard&Poor 500, Heng Seng Index, and Shang Hai Stock Synthetic Index, are almost the same; with the scale-invariance exponents all in the interval $[0.92, 0.95]$. These results provide a strong evidence of the existence of long-rang correlation in financial time series, thus several variance-based methods are restricted for detecting the scale-invariance properties of financial markets. In addition, a parsimonious percolation model for stock markets is proposed, of which the scaling behavior agrees with the real-life markets well.
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"abstract": "In this paper the diffusion entropy technique is applied to investigate the\nscaling behavior of financial markets. The scaling behaviors of four\nrepresentative stock markets, Dow Jones Industrial Average, Standard\u0026Poor 500,\nHeng Seng Index, and Shang Hai Stock Synthetic Index, are almost the same; with\nthe scale-invariance exponents all in the interval $[0.92, 0.95]$. These\nresults provide a strong evidence of the existence of long-rang correlation in\nfinancial time series, thus several variance-based methods are restricted for\ndetecting the scale-invariance properties of financial markets. In addition, a\nparsimonious percolation model for stock markets is proposed, of which the\nscaling behavior agrees with the real-life markets well.",
"arxiv_id": "physics/0508117",
"authors": [
"Shi-Min Cai",
"Pei-Ling Zhou",
"Hui-Jie Yang",
"Chun-Xia Yang",
"Bing-Hong Wang",
"Tao Zhou"
],
"categories": [
"physics.soc-ph"
],
"doi": "10.1016/j.physa.2005.12.004",
"journal_ref": "Phyisca A 367: 337-344 (2006)",
"title": "Diffusion entropy analysis on the scaling behavior of financial markets",
"url": "https://arxiv.org/abs/physics/0508117"
},
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