Abstract
This paper discusses Volume-Price distribution of stock market. The normal distribution-like structures spanning different time are studied, based on which we propose a predictive model of Volume-Price distribution in China stock market. The paper includes three parts: First, the hypothesis that the Chinese stock market day trading volume-price distributions does not obey normal distribution is verified. However, a “fat tail” approximate normal distribution pattern is founded. After smoothing the distribution of volume and price, approximate normal distributions of trading volume and price distributions for different time spans are discovered. On the basis of two previous studies, state transition model of volume-price distributions is proposed. State transition probability table is created based on clustering analysis. The mode can appropriately account for the transition Chinese stock market trading volume- price distribution network transitions between states, and can be used to predict possible future distribution, to provide a quantitative indicator in the stock market investment.
Highlights
Due to chaos in financial market, traditional financial engineering, which is typically based on econometrics method with linear assumption and casualty, usually does not work out
The normal distribution-like structures spanning different time are studied, based on which we propose a predictive model of Volume-Price distribution in China stock market
1) A short-term state transition model is established based on the training set, and a probability generator is constructed
Summary
Due to chaos in financial market, traditional financial engineering, which is typically based on econometrics method with linear assumption and casualty, usually does not work out. Neglect rich cross section information of financial time series, and try to predict specific price, which is nearly impossible. Models with low loss data reduction on rich cross section information become a challenge for researchers. Based on the above hypotheses, it is possible to predict the distribution of future prices, and form investment strategies. The research is based on a large number of micro-data to study the distribution of the micro-structure of volume-price distributions, and the approximate simplification of normal distribution. On the basis of scale-free microstructure, a state transition model is proposed to describe the evolution of dynamic equilibrium of financial market. The micro-structure of financial market and the dynamic transition between each state are explored, and the quantitative suggestions and guidance for the investment behavior of financial market are put forward
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