This paper is based on the perspective of financial physics, using the cumulative distribution of yield to explore the law and characteristics of the whole system of Chinese capital market in bull market and bear mark et, and find that in the bull market, return distribution is from aggregation to dispersion, while in bear market, return distribution being from dispersion to aggregation.
The classical financial theory has shown a great limitation in the interpretation of many anomalies in the real market. Based on the results of nonlinear dynamics, complex systems and statistical physics, the “financial physics” (econophysics), has gradually become an important field in Finance (Wang Peng, Wei Yu, 2014) [
Probability distribution is the most essential and most important statistical property of the variables in the financial system, especially the probability distribution of the return rate, which is at the core position in various asset pricing models [
Market as a whole system of the ups and downs, is the focus of investors’ attention. Both positive investors and negative investors consider the system to make investment decisions [
Taking into account the situation of China’s stock market, here to select a low to the point of the cumulative rate of return distribution. The selected time interval is a [2005.10.28, 2007.1.29], b [2005.10.28, 2007.6.20], c [2005.10.28, 2007.10.17], this is the three section of the rise range, select the cumulative yield data from each interval, analyze a big bull market, excluding data missing listing Corporation, a total of 1368 samples. d [2007.10.17, 2008.1.10], e [2007.10.17, 2008.4.21], f [2007.10.17, 2008.11.4], this is 3 period of decline range, select each interval cumulative yield data, analysis of a bear market, excluding missing data of listed companies were obtained a sample of 1479. g [2008.11.4, 2009.4.20], h [2008.11.4, 2009.8.5], this is a segment of the market, the selection of the range of the cumulative rate of return, excluding data missing companies to obtain a total of 1561 samples.
As shown in
A range of yield distribution show that for the initial stage of the rise, the yield distribution into an aggregation state, the momentum is consistent, the performance is the same, the rise of the gap is not big, only a large margin of the company increased.
B range of yield distribution show that with the rise of the rise of a very big difference, some companies can continue to rise, while some companies are very difficult to continue to rise, and even the emergence of a callback, the yield distribution is a decentralized state.
C range of the cumulative yield distribution show that with the rise of the continued rise in the magnitude of a greater difference, the number of high-yield companies increased, some companies began to callback, the distribution of earnings further dispersed.
To sum up, we can get the market in the bull market in a non normal distribution and continuous changes in the initial stage of the rise in the initial stage, the distribution of income is gathered, along with the rise of the distribution of income distribution from the aggregation of the whole process of the whole process of the accumulation of the whole process of accumulation of dispersed state.
By the D range of yield distribution can be seen, the big bull market after the decline in the initial stage of the distribution of earnings performance is a decentralized state. As the decline continues, the yield distribution of the e interval is still a dispersion state, but the e range of the yield distribution shows that the decline is a systematic decline. The change of yield from d to e is more like a shift in the distribution of returns. Systematic decline further continue, the distribution of the cumulative return rate in the f region shows that the distribution of the state tends to be aggregated. To sum up, we can see that in the Chinese capital market, the big bear market has the following characteristics: The distribution of cumulative return rate in the initial stage of the decline is a dispersion state, then it is a systematic translation, the final distribution tends to the aggregation state. The cumulative rate of return of the whole process is manifested by the evolution from the dispersion to the aggregation.
The above data shows that in the bull market, the cumulative rate of return distribution in the beginning stage is aggregated, along with the rise of the distribution gradually dispersed state; In the bear market, the cumulative rate of return distribution in the beginning stages of the distribution of the state, As the decline continues, the distribution is gradually aggregated. The evolution of this distribution is mainly due to China’s capital market without short selling mechanism.
For the interval “1 - 2” and interval “7 - 8” stage of the market, that is, the initial stage of the rise of the system, the distribution of returns is aggregated. This is because when the market has a good system of good news. At the same time also have the conditions for the rise of the system, market expectations tend to be consistent, the bull market began to start, will be a general rise in the state, There is a big difference in the overall stock of the system, comparison of the distribution of the yield of a and g. The higher the aggregation state, the greater the energy, the higher the possible space.
For the range of the “4 - 5” stage of the market, that is, the initial stage of the system down. Because the market has no short selling mechanism, there is a limit of short selling, and only the stock of investors may sell shares led to the decline in stocks. And for not holding shares of investors cannot through the short sale to promote the decline in stocks. For the start of a bear market, the investors, the impact of the financial effect of the casino, will underestimate the risk of the stock, but also with the optimistic investors to buy stocks. Such investors are expected to be inconsistent, they will lead to a decline in the initial stage of the distribution of the yield is relatively dispersed state.
For the interval “3 - 4” and interval “8 - 9” stage of the market, that is the final stage of the system’s rise. The existing literature suggests that there is a big bubble, that is, the securities price is significantly higher than its intrinsic value [
For the range of the “6 - 7” stage of the market, that is the final stage of the system down. Many documents that appear oversold phenomenon system, in which the price is much lower than its value [
According to the above analysis, it can be seen that the rational investors in the system of the market in the distribution of the rate of return plays an important role. If China’s capital market is introduced into the mechanism of short selling, the rational investors in the bear market can make a profit by selling short. Short selling in the initial stage of the decline in the relatively small decline in stocks, and promote their further decline; Negative feedback trading in the final stages of decline (that is, to follow the trend of trading) short selling stock market disdain, This will make the distribution of the yield in the bear market as well as the evolution of the aggregation state to the dispersed state.
From the perspective of financial physics, this paper makes use of the method of frequency distribution of the accumulative rate of return of different companies and finds that the rule of stock rises from aggregated state to dispersed state in bull market and the rule of stock falls from dispersed to aggregated state in bear market. This paper also explains the rule from two aspects of traditional finance and behavioral finance, providing a reference for investors to analyze and predict the trend of market. Because of the complexity of the whole system of the capital market, and the external factors that affect the distribution of return rate, the theoretical analysis of this law still needs more research.
Li, J. (2018) Ups and Downs of the Stock Market and the Evolution of the Return Distribution. Open Access Library Journal, 5: e4289. https://doi.org/10.4236/oalib.1104289