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Power law classification scheme of time series correlations. On the example of G20 group

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  • Miśkiewicz, Janusz

Abstract

A power law classification scheme (PLCS) of time series correlations is proposed. It is shown that PLCS provides the ability to classify nonlinear correlations and measure their stability. PLCS has been applied to gross domestic product (GDP) per capita of G20 members and their correlations analysed. It has been shown that the method does not only recognise linear correlations properly, but also allows to point out converging time series as well as to distinguish nonlinear correlations. PLCS is capable of crash recognition as it is shown in the Argentina example. Finally the strength of correlations and the stability of correlation matrices have been used to construct a minimum spanning tree (MST). The results were compared with those based on the ultrametric distance (UD). Comparing the structures of MST, UD and PLCS indicates that the latter one is more complicated, but better fits the expected economic relations within the G20.

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  • Miśkiewicz, Janusz, 2013. "Power law classification scheme of time series correlations. On the example of G20 group," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 392(9), pages 2150-2162.
    • Handle: RePEc:eee:phsmap:v:392:y:2013:i:9:p:2150-2162
    DOI: 10.1016/j.physa.2012.12.039
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    1. Miśkiewicz, Janusz & Tadla, Adrian & Trela, Zenon, 2019. "Does the monetary policy influenced cross-correlations on the main world stocks markets? Power Law Classification Scheme analysis," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 519(C), pages 72-81.

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