Evidence of Self-Organization in Time Series of Capital Markets

Leopoldo Sánchez-Cantú; Carlos Arturo Soto-Campos; Andriy Kryvko

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arXiv · 1604.03996

Evidence of Self-Organization in Time Series of Capital Markets

Leopoldo Sánchez-Cantú·Carlos Arturo Soto-Campos·Andriy Kryvko

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Abstract

A methodology is developed to identify, as units of study, each decrease in the value of a stock from a given maximum price level. A critical level in the amount of price declines is found to separate a segment operating under a random walk from a segment operating under a power law. This level is interpreted as a point of phase transition into a self-organized system. Evidence of self-organization was found in all the stock market indices studied but in none of the control synthetic random series. Findings partially explain the fractal structure characteristic of financial time series and suggest that price fluctuations adopt two different operating regimes. We propose to identify downward movements larger than the critical level apparently subject to the power law, as self-organized states, and price decreases smaller than the critical level, as a random walk with the Markov property.

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BibTeX RIS

Leopoldo Sánchez-Cantú, Carlos Arturo Soto-Campos, Andriy Kryvko. 2017-03-27. Evidence of Self-Organization in Time Series of Capital Markets. https://arxiv.org/abs/1604.03996

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