Study on the Nonlinear Dynamic Characteristics of Stock Market Liquidity in China——A Test Based on Fractal Theory

Abstract

Abstract:

Based on China's stock market data, the paper analyzes the nonlinear dynamics characteristics of stock market liquidity through the BDS test, Hurst exponent, correlation dimension inspection and Lyapunov exponent method from the micro perspective. Empirical test shows that the liquidity of both Shanghai and Shenzhen Stock Markets has a nonlinear structure to a certain extent. Further Hurst index calculation results prove that the market liquidity is characterized by mean reversion, anti-persistency and unpredictability. The corresponding correlation dimension estimation values confirm that the liquidity of China's stock market is typical of a low dimensional chaotic system with fractal characteristics, indicating that market liquidity is considerably vulnerable, highly sensitive to minor changes of relevant factors and very likely to incur extreme agglomeration. These results provide empirical evidence for the normal supervision of liquidity in the stock market and the implementation of intervention policy against crisis.

Key words: market liquidity, nonlinear dynamics, chaos, correlation dimension, Lyapunov index

Yin Haiyuan, Hua Yipu. Study on the Nonlinear Dynamic Characteristics of Stock Market Liquidity in China——A Test Based on Fractal Theory[J]. , 2017, 29(8): 43-52.

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