Related papers: State and group dynamics of world stock market by …
We use principle component analysis (PCA) of cross correlations in European government bonds and European stocks to investigate the systemic risk contained in the European economy. We tackle the task to visualize the evolution of risk,…
This paper constructs a global economic policy uncertainty index through the principal component analysis of the economic policy uncertainty indices for twenty primary economies around the world. We find that the PCA-based global economic…
We introduce a class of copulas that we call Principal Component Copulas (PCCs). This class combines the strong points of copula-based techniques with principal component analysis (PCA), which results in flexibility when modelling tail…
The literature provides strong evidence that stock prices can be predicted from past price data. Principal component analysis (PCA) is a widely used mathematical technique for dimensionality reduction and analysis of data by identifying a…
We investigate the daily correlation present among market indices of stock exchanges located all over the world in the time period Jan 1996 - Jul 2009. We discover that the correlation among market indices presents both a fast and a slow…
A system with many degrees of freedom can be characterized by a covariance matrix; principal components analysis (PCA) focuses on the eigenvalues of this matrix, hoping to find a lower dimensional description. But when the spectrum is…
Financial markets have been extensively studied as highly complex evolving systems. In this paper, we quantify financial price fluctuations through a coupled dynamical system composed of phase oscillators. We find a Financial Coherence and…
Principal component analysis (PCA) represents a standard approach to identify collective variables $\{x_i\}\!=\!\boldsymbol{x}$, which can be used to construct the free energy landscape $\Delta G(\boldsymbol{x})$ of a molecular system.…
This study analyzes the dynamic interactions among the NASDAQ index, crude oil, gold, and the US dollar using a reduced-order modeling approach. Time-delay embedding and principal component analysis are employed to encode high-dimensional…
Financial markets, being spectacular examples of complex systems, display rich correlation structures among price returns of different assets. The correlation structures change drastically, akin to phase transitions in physical phenomena,…
Modeling cross-sectional correlations between thousands of stocks, across countries and industries, can be challenging. In this paper, we demonstrate the advantages of using Hierarchical Principal Component Analysis (HPCA) over the classic…
To investigate the universal structure of interactions in financial dynamics, we analyze the cross-correlation matrix C of price returns of the Chinese stock market, in comparison with those of the American and Indian stock markets. As an…
Principal component analysis (PCA) is a useful tool when trying to construct factor models from historical asset returns. For the implied volatilities of U.S. equities there is a PCA-based model with a principal eigenportfolio whose return…
The presence of significant cross-correlations between the synchronous time evolution of a pair of equity returns is a well-known empirical fact. The Pearson correlation is commonly used to indicate the level of similarity in the price…
Principal component analysis (PCA) is a widespread technique for data analysis that relies on the covariance-correlation matrix of the analyzed data. However to properly work with high-dimensional data, PCA poses severe mathematical…
Motivated by the current fears of a potentially stagflationary global economic environment, this paper uses new and recently introduced mathematical techniques to study multivariate time series pertaining to country inflation (CPI),…
The increasing integration of data science techniques into quantitative finance has enabled more systematic and data-driven approaches to portfolio construction. This paper investigates the use of Principal Component Analysis (PCA) in…
We investigate financial market correlations using random matrix theory and principal component analysis. We use random matrix theory to demonstrate that correlation matrices of asset price changes contain structure that is incompatible…
Empirical evidence is given for a significant difference in the collective trend of the share prices during the stock index rising and falling periods. Data on the Dow Jones Industrial Average and its stock components are studied between…
It is widely known that the common risk-factors derived from PCA beyond the first eigenportfolio are generally difficult to interpret and thus to use in practical portfolio management. We explore a alternative approach (HPCA) which makes…