| Efficient Market Hypothesis is the base of modern finance theory. Many financial models are proposed based on EMH. With this formulation, many scholars have made empirical investigation on EMH, but a lot of researches conclude that the EMH is not satisfied with the reality. The finance markets are highly complex, irregular, so Fractal Market Hypothesis was proposed.Fractal theory is one of nonlinear analysis and has only decades since it developed, but because it can efficiently expenses many complicated problem, such as natural and economics phenomena, so it has became the strong analysis tool of the nonlinear capital market theory. The paper begins with the EMH , according to strict logicality, we find out the limitation of old test methods and only non-linear analytical methods can study the capital market. Furthermore the results of the empirical study reveal that realistic situation is contrary to EMH and Chinese stock market is a non-linear dynamical system and possesses remarkable Fractal characteristics. This paper uses R/S analysis of fractal theory to research China stock market, and show the fractal feature of China stock market. This discovery will help us to understand the stock market of China with new point of view, and guide us to grasp the result of the market better. This paper will analysis the following contents.1. Dissertating Efficient Market Theory and demonstrate that the EMH is pattern of linearity. It took important role to accelerate the theory of Finance, but many researches have revealed that EMH can't exactly describe the perplexing behavior of Capital Market.2. Having introduced the basic knowledge of fractal and the Fractal Market Theory, researched into the difference between Fractal Market Theory and Efficient Market Theory, and pointed out that the Fractal Market Theory can describe the Capital Market behavior and researched into the essence of complexity on development and evolvement of Capital Market very well.3. Investigating the test methods of the Fractal characteristics of Capital Market. The Empirical tests are conducted on the Fractal characteristics of the Chinese stock market. The results show that Shanghai and Shenzhen stock market have all obvious fractal characteristics, such as ,self-similarity, state persistence, long-memory and so on, which are not belong to that EMH described. Compared Shanghai with Shenzhen stock market, whether date data,week data or month data, the Hurst Exponent of Shenzhen market is bigger than that of Shanghai market. It indicated that the Fractal characteristics of Shenzhen stock market is more obvious than Shanghai stock market, and the efficiency is weaker. Then we analysis the Fractal characteristics in different stages of Chinese sock market, in generally, the efficiency of Chinese stock market is improving.4. We use positive feedback model to demonstrate the mechanism and reason of the complexity of stock market. The security market is a complex and changeable system. The investors' self feelings and outside factors which result that stock prices behavior never stick to a random walk process are usual. Different investors in the market impact interactively , and it will make the stock-price' evolution path more complex.5. Using Hurst Exponent and the method of VaR, we construct index to evaluate the market investment risks comprehensively. Then we analysis empirically 13 industrious indexes of Chinese stock market on risk and find the difference of risk in 13 industrious is not obvious. |
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