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Correlations, risk and crisis: From physiology to finance

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  • Gorban, Alexander N.
  • Smirnova, Elena V.
  • Tyukina, Tatiana A.

Abstract

We study the dynamics of correlation and variance in systems under the load of environmental factors. A universal effect in ensembles of similar systems under the load of similar factors is described: in crisis, typically, even before obvious symptoms of crisis appear, correlation increases, and, at the same time, variance (and volatility) increases too. This effect is supported by many experiments and observations of groups of humans, mice, trees, grassy plants, and on financial time series.

Suggested Citation

  • Gorban, Alexander N. & Smirnova, Elena V. & Tyukina, Tatiana A., 2010. "Correlations, risk and crisis: From physiology to finance," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 389(16), pages 3193-3217.
    • Handle: RePEc:eee:phsmap:v:389:y:2010:i:16:p:3193-3217
    DOI: 10.1016/j.physa.2010.03.035
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