Related papers: Correlation structure of extreme stock returns
The measured correlations of financial time series in subsequent epochs change considerably as a function of time. When studying the whole correlation matrices, quasi-stationary patterns, referred to as market states, are seen by applying…
We show that financial correlations exhibit a non-trivial dynamic behavior. We introduce a simple phenomenological model of a multi-asset financial market, which takes into account the impact of portfolio investment on price dynamics. This…
Pearson correlation and mutual information based complex networks of the day-to-day returns of US S&P500 stocks between 1985 and 2015 have been constructed in order to investigate the mutual dependencies of the stocks and their nature. We…
Estimation of the covariance matrix of asset returns is crucial to portfolio construction. As suggested by economic theories, the correlation structure among assets differs between emerging markets and developed countries. It is therefore…
We establish several new stylised facts concerning the intra-day seasonalities of stock dynamics. Beyond the well known U-shaped pattern of the volatility, we find that the average correlation between stocks increases throughout the day,…
The correlation matrix formalism is used to study temporal aspects of the stock market evolution. This formalism allows to decompose the financial dynamics into noise as well as into some coherent repeatable intraday structures. The present…
Inspired by the recent literature on aggregation theory, we aim at relating the long range correlation of the stocks return volatility to the heterogeneity of the investors' expectations about the level of the future volatility. Based on a…
The correlation coefficient between stocks depends on price history and includes information on hierarchical structure in financial markets. It is useful for portfolio selection and estimation of risk. I introduce the Life Time of…
We study the dynamics of correlation and variance in systems under the load of environmental factors. A universal effect in ensembles of similar systems under the load of similar factors is described: in crisis, typically, even before…
Financial empirical correlation matrices of all the companies which both, the Deutsche Aktienindex (DAX) and the Dow Jones comprised during the time period 1990-1999 are studied using a time window of a limited, either 30 or 60, number of…
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…
Factor models characterize the joint behavior of large sets of financial assets through a smaller number of underlying drivers. We develop a network-based framework in which factors emerge naturally from the structure of interactions among…
A new methodology has been introduced to clean the correlation matrix of single stocks returns based on a constrained principal component analysis using financial data. Portfolios were introduced, namely "Fundamental Maximum Variance…
We exploit a continuous time random walk description of stock prices to obtain a fast and accurate evaluation of their volatility from intraday data. We show that financial markets are usefully described as open physical systems. Indeed we…
What is the dominating mechanism of the price dynamics in financial systems is of great interest to scientists. The problem whether and how volatilities affect the price movement draws much attention. Although many efforts have been made,…
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…
We examine how the most prevalent stochastic properties of key financial time series have been affected during the recent financial crises. In particular we focus on changes associated with the remarkable economic events of the last two…
Factor analysis is a statistical technique employed to evaluate how observed variables correlate through common factors and unique variables. While it is often used to analyze price movement in the unstable stock market, it does not always…
We analyse the temporal changes in the cross correlations of returns on the New York Stock Exchange. We show that lead-lag relationships between daily returns of stocks vanished in less than twenty years. We have found that even for high…
We revisit the index leverage effect, that can be decomposed into a volatility effect and a correlation effect. We investigate the latter using a matrix regression analysis, that we call `Principal Regression Analysis' (PRA) and for which…