Scale-Dependent Price Fluctuations for the Indian Stock Market

Classic studies of the probability density of price fluctuations g for stocks and foreign exchanges of several highly developed economies have been interpreted using a power-law probability density function P(g) ∼ g−( 1) with exponent values > 2, which are outside the L´evy-stable regime 0 < < 2. To test the universality of this relationship for less highly developed economies, we analyze daily returns for the period Nov. 1994—June 2002 for the 49 largest stocks of the National Stock Exchange which has the highest volume of trade in India. We find that P(g) decays as an exponential function P(g) ∼ exp(− g) with a characteristic decay scales = 1.51 ± 0.05 for the negative tail and = 1.34 ± 0.04 for the positive tail, which is significantly different from that observed for developed economies. Thus we conclude that the Indian stock market may belong to a universality class that differs from those of developed countries analyzed previously