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 (22)

• Random Matrix Theories in Quantum Physics: Common Concepts
• Hierarchical Structure in Financial Markets
• Detrended Cross-Correlation Analysis: A New Method for Analyzing Two Non-stationary Time Series
• Noise Dressing of Financial Correlation Matrices
• Universal and non-universal properties of cross-correlations in financial time series
• A Random Matrix Approach to Cross-Correlations in Financial Data
• Emergence of Cooperation and Organization in an Evolutionary Game
• Scaling of the distribution of fluctuations of financial market indices
• The statistical properties of the volatility of price fluctuations
• Herd behavior and aggregate fluctuations in financial markets
• Scaling of the distribution of price fluctuations of individual companies
• The leverage effect in financial markets: retarded volatility and market panic
• Transmission of Information and Herd Behavior: an Application to Financial Markets
• Modelling fluctuations of financial time series: from cascade process to stochastic volatility model
• Random Matrix Theory Analysis of Cross Correlations in Financial Markets
• Volatility clustering and scaling for financial time series due to attractor bubbling
• Collective behavior of stock price movements in an emerging market
• Rational Decisions, Random Matrices and Spin Glasses
• Microscopic Models for Long Ranged Volatility Correlations
• An analysis of Cross-correlations in South African Market data
• Self-organization of price fluctuation distribution in evolving markets
• Persistence Probabilities of the German DAX and Shanghai Index

Cited by in corpus (24)

• Correlation, Network and Multifractal Analysis of Global Financial Indices
• Quantifying and Modeling Long-Range Cross-Correlations in Multiple Time Series with Applications to World Stock Indices
• Systemic risk and spatiotemporal dynamics of the US housing market
• Structure of local interactions in complex financial dynamics
• Will the US Economy Recover in 2010? A Minimal Spanning Tree Study
• Dynamic evolution of cross-correlations in the Chinese stock market
• Anti-correlation and subsector structure in financial systems
• Adaptive financial networks with static and dynamic thresholds
• Correlation structure and principal components in global crude oil market
• Market correlation structure changes around the Great Crash
• Agent-based model with asymmetric trading and herding for complex financial systems
• Agent-based model with multi-level herding for complex financial systems
• Time-reversal asymmetry in financial systems
• On return-volatility correlation in financial dynamics
• New approaches in agent-based modeling of complex financial systems
• Random matrix approach to the dynamics of stock inventory variations
• Memory effect and multifractality of cross-correlations in financial markets
• Spatial and temporal structures of four financial markets in Greater China
• How volatilities nonlocal in time affect the price dynamics in complex financial systems
• Coherence and incoherence collective behavior in financial market
• A 2D Levy-flight model for the complex dynamics of real-life financial markets
• Dynamic structure of stock communities: A comparative study between stock returns and turnover rates
• Geography and distance effect on financial dynamics in the Chinese stock market
• Trading characteristics of member firms on the Korea Exchange