IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Log in (now much improved!) to save this article

Non-stationary correlation matrices and noise

Listed author(s):
  • Martins, André C.R.
Registered author(s):

    The exact meaning of the noise spectrum of eigenvalues of the correlation matrix is discussed. In order to better understand the possible phenomena behind the observed noise, the spectrum of eigenvalues of the correlation matrix is studied under a model where most of the true eigenvalues are zero and the parameters are non-stationary. The results are compared with real observation of Brazilian assets, suggesting that, although the non-stationarity seems to be an important aspect of the problem, partially explaining some of the eigenvalues as well as part of the kurtosis of the assets, it cannot, by itself, provide all the corrections needed to make the proposed model fit the data perfectly.

    If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

    File URL: http://www.sciencedirect.com/science/article/pii/S0378437106013550
    Download Restriction: Full text for ScienceDirect subscribers only. Journal offers the option of making the article available online on Science direct for a fee of $3,000

    As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

    Article provided by Elsevier in its journal Physica A: Statistical Mechanics and its Applications.

    Volume (Year): 379 (2007)
    Issue (Month): 2 ()
    Pages: 552-558

    as
    in new window

    Handle: RePEc:eee:phsmap:v:379:y:2007:i:2:p:552-558
    DOI: 10.1016/j.physa.2006.12.020
    Contact details of provider: Web page: http://www.journals.elsevier.com/physica-a-statistical-mechpplications/

    References listed on IDEAS
    Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

    as
    in new window


    1. Drożdż, S & Grümmer, F & Górski, A.Z & Ruf, F & Speth, J, 2000. "Dynamics of competition between collectivity and noise in the stock market," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 287(3), pages 440-449.
    2. Burda, Z. & Görlich, A. & Jarosz, A. & Jurkiewicz, J., 2004. "Signal and noise in correlation matrix," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 343(C), pages 295-310.
    3. Vasiliki Plerou & Parameswaran Gopikrishnan & Bernd Rosenow & Luis A. Nunes Amaral & H. Eugene Stanley, 1999. "Universal and non-universal properties of cross-correlations in financial time series," Papers cond-mat/9902283, arXiv.org.
    4. Pafka, Szilárd & Kondor, Imre, 2004. "Estimated correlation matrices and portfolio optimization," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 343(C), pages 623-634.
    5. Szilard Pafka & Marc Potters & Imre Kondor, 2004. "Exponential Weighting and Random-Matrix-Theory-Based Filtering of Financial Covariance Matrices for Portfolio Optimization," Science & Finance (CFM) working paper archive 500050, Science & Finance, Capital Fund Management.
    6. Sergei Maslov, 2001. "Measures of globalization based on cross-correlations of world financial indices," Papers cond-mat/0103397, arXiv.org, revised Apr 2001.
    7. Pafka, Szilárd & Kondor, Imre, 2003. "Noisy covariance matrices and portfolio optimization II," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 319(C), pages 487-494.
    8. Kwapień, J. & Drożdż, S. & Oświe¸cimka, P., 2006. "The bulk of the stock market correlation matrix is not pure noise," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 359(C), pages 589-606.
    9. Zdzislaw Burda & Jerzy Jurkiewicz, 2003. "Signal and Noise in Financial Correlation Matrices," Papers cond-mat/0312496, arXiv.org, revised Feb 2004.
    10. Burda, Zdzisław & Jurkiewicz, Jerzy, 2004. "Signal and noise in financial correlation matrices," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 344(1), pages 67-72.
    11. Thomas Mikosch & Cătălin Stărică, 2004. "Nonstationarities in Financial Time Series, the Long-Range Dependence, and the IGARCH Effects," The Review of Economics and Statistics, MIT Press, vol. 86(1), pages 378-390, February.
    12. Malevergne, Y. & Sornette, D., 2004. "Collective origin of the coexistence of apparent random matrix theory noise and of factors in large sample correlation matrices," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 331(3), pages 660-668.
    13. Maslov, Sergei, 2001. "Measures of globalization based on cross-correlations of world financial indices," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 301(1), pages 397-406.
    14. Drożdż, S & Grümmer, F & Ruf, F & Speth, J, 2001. "Towards identifying the world stock market cross-correlations: DAX versus Dow Jones," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 294(1), pages 226-234.
    Full references (including those not matched with items on IDEAS)

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    When requesting a correction, please mention this item's handle: RePEc:eee:phsmap:v:379:y:2007:i:2:p:552-558. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Dana Niculescu)

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If references are entirely missing, you can add them using this form.

    If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.