Empirical Study Of China Security Market Random Walk Behavior

This paper analyses the key role of random walk in the Efficient Market Hypothesis firstly. The second part of this paper gives a sketch of the viewpoints and development of Fractal Market Hypothesis which was initially derived by Petersen. At the same time, we introduce the model of rescaled range in which method the FMH quantify the random walk and articulate its calculating progress and its meanings, merits. In the third part, we use R/S method to analyze both Shanghai security market and Shenzhen security Market. More than that, we selected two special stocks to character their fractal feature. The result shows that Chinese security price don't obey random walk, instead, there is a serial correlation which imply that the traditional technical analysis is effective to some extent. In this paper, we innovatively regress the rescaled range against different time increments step by step through which we hope to disclose the underlining rule in the Hurst index. One of the conclusions is that, from the fractal viewpoint, China security price was not following a random walk progress. The security price is predictable in short term. We can make a big fortune through analyzing historical prices behavior. Another conclusion is that the predictability of Shenzhen security market is stronger than that of Shanghai market. In the end of this paper, we derive some policy suggestions which include varying investors, introducing market-maker in Shenzhen market, abandoning special transfer regime for no-longer qualified listed company which should be delisted immediately.