Power law analysis of financial index dynamics

Machado, J. A. Tenreiro; Duarte, Fernando B.; Duarte, Gonçalo Monteiro

http://hdl.handle.net/10400.22/3737

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Authors

Machado, J. A. Tenreiro

Duarte, Fernando B.

Duarte, Gonçalo Monteiro

Abstract(s)

Power law PL and fractional calculus are two faces of phenomena with long memory behavior. This paper applies PL description to analyze different periods of the business cycle. With such purpose the evolution of ten important stock market indices DAX, Dow Jones, NASDAQ, Nikkei, NYSE, S&P500, SSEC, HSI, TWII, and BSE over time is studied. An evolutionary algorithm is used for the fitting of the PL parameters. It is observed that the PL curve fitting constitutes a good tool for revealing the signal main characteristics leading to the emergence of the global financial dynamic evolution.