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Recurrence quantification analysis of global stock markets

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  • Bastos, João A.
  • Caiado, Jorge

Abstract

This study investigates the presence of deterministic dependencies in international stock markets using recurrence plots and recurrence quantification analysis (RQA). The results are based on a large set of free float-adjusted market capitalization stock indices, covering a period of 15 years. The statistical tests suggest that the dynamics of stock prices in emerging markets is characterized by higher values of RQA measures when compared to their developed counterparts. The behavior of stock markets during critical financial events, such as the burst of the technology bubble, the Asian currency crisis, and the recent subprime mortgage crisis, is analyzed by performing RQA in sliding windows. It is shown that during these events stock markets exhibit a distinctive behavior that is characterized by temporary decreases in the fraction of recurrence points contained in diagonal and vertical structures.

Suggested Citation

  • Bastos, João A. & Caiado, Jorge, 2011. "Recurrence quantification analysis of global stock markets," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 390(7), pages 1315-1325.
    • Handle: RePEc:eee:phsmap:v:390:y:2011:i:7:p:1315-1325
    DOI: 10.1016/j.physa.2010.12.008
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    References listed on IDEAS

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    More about this item

    Keywords

    Recurrence plot; Recurrence quantification analysis; Nonlinear dynamics; International stock markets;
    All these keywords.

    JEL classification:

    • C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General
    • G01 - Financial Economics - - General - - - Financial Crises
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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