The Application of Fractal Theory in Futures Market Analysis

This paper is about the application of Fractal Geometry in futures market analysis. Through R/S analysis we study the main contracts of China's three futures markets (Shanghai Futures Exchange, Dalian Commodity Exchange and Zhengzhou Commodity Exchange). Firstly, by calculating their Hurst exponent, we can see that their time series are persistent at various degrees, and they follow a partial random walk. After that, we compare their nonlinear dynamics characteristics and market liquidity features. Secondly, we calculate V statistics of these time series, discover long-term memory in a non-periodic cycle, and then we get each one their average cycle length. Finally, we sum up their nonlinear dynamics characteristics and market liquidity features. We propose such a proposition as an incomplete basis: The primary and ultimate function of the futures market should be the provision of adequate liquidity rather than the traditionally one-- price discovery.