Financial earthquakes, aftershocks and scaling in emerging stock markets
Physica A : Statistical Mechanics and its Applications
306 - 316
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This paper provides evidence for scaling laws in emerging stock markets. Estimated parameters using different definitions of volatility show that the empirical scaling law in every stock market is a power law. This power law holds from 2 to 240 business days (almost 1 year). The scaling parameter in these economies changes after a change in the definition of volatility. This finding indicates that the stock returns may have a multifractal nature. Another scaling property of stock returns is examined by relating the time after a main shock to the number of aftershocks per unit time. The empirical findings show that after a major fall in the stock returns, the stock market volatility above a certain threshold shows a power law decay, described by Omori's law. © 2003 Elsevier B.V. All rights reserved.
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