Random, but not so much a parameterization for the returns and correlation matrix of financial time series
AbstractA parameterization that is a modified version of a previous work is proposed for the returns and correlation matrix of financial time series and its properties are studied. This parameterization allows easy introduction of non-stationarity and it shows several of the characteristics of the true, observed realizations, such as fat tails, volatility clustering, and a spectrum of eigenvalues of the correlation matrix that can be understood as an extension of Random Matrix Theory results. The predicted behavior of this parameterization for the eigenvalues is compared with the eigenvalues of Brazilian assets and it is shown that those predictions fit the data better than Random Matrix Theory.
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Bibliographic InfoArticle provided by Elsevier in its journal Physica A: Statistical Mechanics and its Applications.
Volume (Year): 383 (2007)
Issue (Month): 2 ()
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Web page: http://www.journals.elsevier.com/physica-a-statistical-mechpplications/
Correlation matrix; Random Matrix Theory; Time series; Non-stationarity;
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- Sandoval, Leonidas & Franca, Italo De Paula, 2012. "Correlation of financial markets in times of crisis," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 391(1), pages 187-208.
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