Recurrence Plot Analysis of Stock Market Based on CAPM Model and Stock Price Time Series

Abstract

In this paper, we mainly use recurrence plot, recurrence quantification analysis and cross recurrence plot to investigate the potential nonlinear dynamical characteristics of the stock market. In addition, we introduce and analyze the capital asset pricing model (CAPM), which can analyze the correlation between returns and risks of stock price data. In particular, we selected the large-cap stocks represented by SSE 50 index and the small-cap stocks represented by CSI 500 index as our research objects. Through the recurrence plot analysis of the time series of [Formula: see text] factor of CAPM and the time series of the stock market, we can find the advantages of large-cap stocks, such as stronger stationarity and long-term certainty, the disadvantages of small-cap stocks, such as greater risk and information, and nonlinear cross recurrence with the stock market.

Capital Asset Pricing Model: A Brief Review on Advantages, Disadvantages and Alternatives

“…Many scholars have examined this model's significant significance and potential applications in recent years. The CAPM is used by Zhu Hanhuai and Huang Jingjing, the authors argue the nonlinear cross-recurrence with the stock market [1]. Research on a conditional higher-moment CAPM is conducted by Vasco Vendrame et al They introduce a conditional variant that takes into consideration both changing risk premia and changing factor loadings over time.…”