Uncovering the dynamics of correlation structures relative to the collective market motion
| Autor: | Thomas Guhr, Anton J. Heckens, Sebastian M. Krause |
|---|---|
| Jazyk: | angličtina |
| Rok vydání: | 2020 |
| Předmět: |
Statistics and Probability
Index (economics) Statistical Finance (q-fin.ST) Series (mathematics) Mathematical finance Quantitative Finance - Statistical Finance Statistical and Nonlinear Physics Function (mathematics) Physik (inkl. Astronomie) 01 natural sciences Motion (physics) 010305 fluids & plasmas FOS: Economics and business Matrix (mathematics) 0103 physical sciences Statistical physics Statistics Probability and Uncertainty 010306 general physics Cluster analysis Eigenvalues and eigenvectors Mathematics |
| Popis: | 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 clustering methods. They emerge, disappear or reemerge, but they are dominated by the collective motion of all stocks. In the jargon, one speaks of the market motion, it is always associated with the largest eigenvalue of the correlation matrices. Thus the question arises, if one can extract more refined information on the system by subtracting the dominating market motion in a proper way. To this end we introduce a new approach by clustering reduced-rank correlation matrices which are obtained by subtracting the dyadic matrix belonging to the largest eigenvalue from the standard correlation matrices. We analyze daily data of 262 companies of the S&P 500 index over a period of almost 15 years from 2002 to 2016. The resulting dynamics is remarkably different, and the corresponding market states are quasi-stationary over a long period of time. Our approach adds to the attempts to separate endogenous from exogenous effects. 30 pages, 17 figures |
| Databáze: | OpenAIRE |
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