Related papers: A model for correlations in stock markets
In this paper we present an econophysic model for the description of shares transactions in a capital market. For introducing the fundamentals of this model we used an analogy between the electrical field produced by a system of charges and…
Many studies assume stock prices follow a random process known as geometric Brownian motion. Although approximately correct, this model fails to explain the frequent occurrence of extreme price movements, such as stock market crashes. Using…
With the network methods and random matrix theory, we investigate the interaction structure of communities in financial markets. In particular, based on the random matrix decomposition, we clarify that the local interactions between the…
We present an interacting-agent model of speculative activity explaining bubbles and crashes in stock markets. We describe stock markets through an infinite-range Ising model to formulate the tendency of traders getting influenced by the…
We present a simple model of a stock market where a random communication structure between agents gives rise to a heavy tails in the distribution of stock price variations in the form of an exponentially truncated power-law, similar to…
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…
We find a novel correlation structure in the residual noise of stock market returns that is remarkably linked to the composition and stability of the top few significant factors driving the returns, and moreover indicates that the noise…
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…
An artificial stock market is established with the modeling method and ideas of cellular automata. Cells are used to represent stockholders, who have the capability of self-teaching and are affected by the investing history of the…
We analyse the structure of the distribution of eigenvalues of the stock market correlation matrix with increasing length of the time series representing the price changes. We use 100 highly-capitalized stocks from the American market and…
We make an attempt to map a simple economically motivated model for the price evolution [J. Phys. A: Gen. Math 33, 3637 (2000)] to the phenomenological renormalization group scaling of stock markets. This mapping gives insight into the…
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…
High frequency data in finance have led to a deeper understanding on probability distributions of market prices. Several facts seem to be well stablished by empirical evidence. Specifically, probability distributions have the following…
The financial market is a complex dynamical system composed of a large variety of intricate relationships between several entities, such as banks, corporations and institutions. At the heart of the system lies the stock exchange mechanism,…
A detailed analysis of correlation between stock returns at high frequency is compared with simple models of random walks. We focus in particular on the dependence of correlations on time scales - the so-called Epps effect. This provides a…
With the random matrix theory, we study the spatial structure of the Chinese stock market, American stock market and global market indices. After taking into account the signs of the components in the eigenvectors of the cross-correlation…
This work models the interconnection of company's investment managers' representations and the market attraction of its shares. The models that reflect the connection of the company's market effectiveness indices and parameters of its…
The value of stocks, indices and other assets, are examples of stochastic processes with unpredictable dynamics. In this paper, we discuss asymmetries in short term price movements that can not be associated with a long term positive trend.…
Fat tails in financial time series and increase of stocks cross-correlations in high volatility periods are puzzling facts that ask for new paradigms. Both points are of key importance in fundamental research as well as in Risk Management…
The vast majority of market impact studies assess each product individually, and the interactions between the different order flows are disregarded. This strong approximation may lead to an underestimation of trading costs and possible…