Cross-correlation in financial dynamics

Abstract

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 important emerging market, the Chinese market exhibits much stronger correlations than the developed markets. In the Chinese market, the interactions between the stocks in a same business sector are weak, while extra interactions in unusual sectors are detected. Using a variation of the two-factor model, we simulate the interactions in financial markets.

6 pages, 3 figures

References in corpus (3)

• Detrended Cross-Correlation Analysis: A New Method for Analyzing Two Non-stationary Time Series
• Collective behavior of stock price movements in an emerging market
• Self-organization of price fluctuation distribution in evolving markets

Cited by in corpus (5)

• Structure of local interactions in complex financial dynamics
• Agent-based model with asymmetric trading and herding for complex financial systems
• Agent-based model with multi-level herding for complex financial systems
• On return-volatility correlation in financial dynamics
• How volatilities nonlocal in time affect the price dynamics in complex financial systems