Zinenko A.V.Siberian State Aerospace University named after Academician M.F. Reshetnev, Krasnoyarsk, Russian Federation anna-z@mail.ru
Subject The article analyzes quotation movements in financial markets. Financial market is a phenomenon that has existed and evolved for centuries. The discipline studying the phenomenon should also develop and apply new methods of research, analysis, and forecasting. The subject of the paper is power laws in financial markets. Power laws are applied to study social and economic phenomena, i.e. the ones with significant involvement of the human factor. Objectives The purpose is to analyze the conformity of the time series of modern stock index data with the classical probabilistic law and power laws. Obviously, these are mutually exclusive hypotheses. Methods To check the conformity of the classical theory with the normal law, I used the three-sigma rule; the normal distribution should comply with the rule. I applied a visual method to review whether there is conformity with the power law. Results I have studied the quote behavior of six global stock market indices. The obtained findings may serve as practical confirmation of new financial investment theories. Conclusions and Relevance Some of the analyzed stock market indices can be described by the classical normal distribution law. However, certain indices do not follow the three-sigma rule and fall under the power law. The conclusion enables to further develop the new concept of the stock market quotations' movements.
Keywords: stock exchange quotation, three-sigma rule, power law, Pareto distribution
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