Analysis of cross-correlations between financial markets after the 2008 crisis
Please cite this item using this persistent URLhttp://hdl.handle.net/11693/20763
Physica A: Statistical Mechanics and its Applications
- Research Paper 
We analyze the cross-correlation matrix C of the index returns of the main financial markets after the 2008 crisis using methods of random matrix theory. We test the eigenvalues of C for universal properties of random matrices and find that the majority of the cross-correlation coefficients arise from randomness. We show that the eigenvector of the largest deviating eigenvalue of C represents a global market itself. We reveal that high volatility of financial markets is observed at the same times with high correlations between them which lowers the risk diversification potential even if one constructs a widely internationally diversified portfolio of stocks. We identify and compare the connection and cluster structure of markets before and after the crisis using minimal spanning and ultrametric hierarchical trees. We find that after the crisis, the co-movement degree of the markets increases. We also highlight the key financial markets of pre and post crisis using main centrality measures and analyze the changes. We repeat the study using rank correlation and compare the differences. Further implications are discussed. © 2013 Elsevier B.V. All rights reserved.
Showing items related by title, author, creator and subject.
Pan J.-Y.; Yang H.-J.; Faloutsos, C.; Duygulu P. (2004)Given an image (or video clip, or audio song), how do we automatically assign keywords to it? The general problem is to find correlations across the media in a collection of multimedia objects like video clips, with colors, ...
Karaman, M.; Köymen H.; Atalar, A.; O'Donnell, M. (1994)The influence of missing array elements on aberration correction based on time delay estimation using radio frequency signals of neighboring elements is experimentally inves-tigated. Normalized cross correlation and sum ...
Investigation of litosphere-ionosphere coupling using total electron content [Toplam elektron i̇çeriǧi ile litosfer-i̇yonosfer baǧlaşiminin i̇ncelenmesi] Karatay, S.; Arikan F.; Arikan, O. (2009)In this study, the relation between Total Electron Content (TEC) estimates obtained from GPS and the earthquakes is examined. Five earthquakes between 2003-2008 occured in Japan with different properties and China earthquake ...