Scaling power laws in the Sao Paulo Stock Exchange

The scaling of the probability distribution of the Sao Paulo Stock Exchange index is shown to be described by a Levy stable stochastic process for the modal region of the distribution. Data refer to daily records for the 30−year period 1968−1998. The truncated Levy process is characterized by a scaling index of 1.66. Scaling power laws are also shown to be present in the mean and standard deviation of the series as the time horizon is increased. A power law is also found for the autocorrelation time of the natural logs of the index series. The deviations from the line that best fits the natural logs of the series are also found to be short range autocorrelated and to follow an exponential decay. We are grateful to Annibal Figueiredo, Neil Pearson, and an anonymous referee for valuable comments. Any remaining errors and shortcomings are our responsibility. Citation: Gleria, Iram, Raul Matsushita, and Sergio Da Silva, (2002) "Scaling power laws in the Sao Paulo Stock Exchange." Economics Bulletin, Vol. 7, No. 3 pp. 1−12 Submitted: March 7, 2002. Accepted: July 17, 2002. URL: http://www.economicsbulletin.com/2002/volume7/EB−02G10002A.pdf