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 InfoPaper provided by arXiv.org in its series Papers with number physics/0701025.
Date of creation: Jan 2007
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Publication status: Published in Physica A, 383, pp. 527-532 (2007)
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Web page: http://arxiv.org/
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- Camilo Rodrigues Neto & Andr\' e C. R. Martins, 2007. "Multifractality in the Random Parameters Model," Papers 0710.5497, arXiv.org.
- Ormerod, Paul, 2008. "Random Matrix Theory and Macro-Economic Time-Series: An Illustration Using the Evolution of Business Cycle Synchronisation, 1886-2006," Economics - The Open-Access, Open-Assessment E-Journal, Kiel Institute for the World Economy, vol. 2(26), pages 1-10.
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