IDEAS home Printed from https://ideas.repec.org/a/kap/compec/v66y2025i6d10.1007_s10614-024-10820-0.html

Correlation Structure of the Spanish Stock Market Around COVID-19 Using Random Matrix Theory

Author

Listed:
  • Andy Domínguez-Monterroza

    (Universidad Tecnológica de Bolívar, Facultad de Ciencias Básicas)

  • Antonio Jiménez-Martín

    (Universidad Politécnica de Madrid, Grupo de Análisis de Decisiones y Estadística, Departamento de Inteligencia Artificial)

  • Alfonso Mateos-Caballero

    (Universidad Politécnica de Madrid, Grupo de Análisis de Decisiones y Estadística, Departamento de Inteligencia Artificial)

Abstract

In this work we analyze the correlation structure of the Spanish stock market around COVID-19 using random matrix theory (RMT). The results reveal that the empirical spectral distribution of eigenvalues associated with correlation matrices of prices for major companies listed on IBEX35 and IBEXC differs across the analyzed periods. In all cases, it deviates from the theoretical spectral distribution predicted by RMT through the Marchenko-Pastur law. In particular, during the COVID-19 crisis, the maximum eigenvalue exceeds the maximum eigenvalue in different periods before and after the pandemic, effectively capturing the state or mode of the market under crisis conditions. The second-largest eigenvalue facilitates the identification of groups among stocks associated with its corresponding eigenvector. These findings hold potential for developing strategies to assess systemic risk in the Spanish stock market.

Suggested Citation

  • Andy Domínguez-Monterroza & Antonio Jiménez-Martín & Alfonso Mateos-Caballero, 2025. "Correlation Structure of the Spanish Stock Market Around COVID-19 Using Random Matrix Theory," Computational Economics, Springer;Society for Computational Economics, vol. 66(6), pages 4543-4558, December.
    • Handle: RePEc:kap:compec:v:66:y:2025:i:6:d:10.1007_s10614-024-10820-0
    DOI: 10.1007/s10614-024-10820-0
    as

    Download full text from publisher

    File URL: http://link.springer.com/10.1007/s10614-024-10820-0
    File Function: Abstract
    Download Restriction: Access to the full text of the articles in this series is restricted.
    File URL: https://libkey.io/10.1007/s10614-024-10820-0?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to

    for a different version of it.

    References listed on IDEAS

    as
    1. Benkraiem, Ramzi & Garfatta, Riadh & Lakhal, Faten & Zorgati, Imen, 2022. "Financial contagion intensity during the COVID-19 outbreak: A copula approach," International Review of Financial Analysis, Elsevier, vol. 81(C).
    2. Bernd Rosenow & Vasiliki Plerou & Parameswaran Gopikrishnan & Luís A. Nunes Amaral & H. Eugene Stanley, 2000. "Application Of Random Matrix Theory To Study Cross-Correlations Of Stock Prices," International Journal of Theoretical and Applied Finance (IJTAF), World Scientific Publishing Co. Pte. Ltd., vol. 3(03), pages 399-403.
    3. Michael C. Munnix & Takashi Shimada & Rudi Schafer & Francois Leyvraz Thomas H. Seligman & Thomas Guhr & H. E. Stanley, 2012. "Identifying States of a Financial Market," Papers 1202.1623, arXiv.org.
    4. Ramzi Benkraiem & Riadh Garfatta & Faten Lakhal & Imen Zorgati, 2022. "Financial contagion intensity during the COVID-19 outbreak: A copula approach," Post-Print hal-03638322, HAL.
    5. Molero-González, L. & Trinidad-Segovia, J.E. & Sánchez-Granero, M.A. & García-Medina, A., 2023. "Market Beta is not dead: An approach from Random Matrix Theory," Finance Research Letters, Elsevier, vol. 55(PA).
    6. Davidson, Sharada Nia, 2020. "Interdependence or contagion: A model switching approach with a focus on Latin America," Economic Modelling, Elsevier, vol. 85(C), pages 166-197.
    7. Joël Bun & Jean-Philippe Bouchaud & Marc Potters, 2017. "Cleaning large correlation matrices: tools from random matrix theory," Post-Print hal-01491304, HAL.
    8. Fabio Vanni & Asmerilda Hitaj & Elisa Mastrogiacomo, 2024. "Enhancing Portfolio Allocation: A Random Matrix Theory Perspective," Mathematics, MDPI, vol. 12(9), pages 1-16, May.
    9. Yue-Hua Dai & Wen-Jie Xie & Zhi-Qiang Jiang & George J. Jiang & Wei-Xing Zhou, 2016. "Correlation structure and principal components in the global crude oil market," Empirical Economics, Springer, vol. 51(4), pages 1501-1519, December.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Prelorentzos, Arsenios-Georgios N. & Konstantakis, Konstantinos N. & Michaelides, Panayotis G. & Xidonas, Panos & Goutte, Stephane & Thomakos, Dimitrios D., 2024. "Introducing the GVAR-GARCH model: Evidence from financial markets," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 91(C).
    2. Laura Molero González & Roy Cerqueti & Raffaele Mattera & J.E. Trinidad Segovia, 2025. "The Random Matrix-based informative content of correlation matrices in stock markets," Post-Print hal-05109019, HAL.
    3. Li, Yaxing & Lau, Wee-Yeap & Ng, Kok-Haur, 2025. "Impact of unconventional monetary policy on stock market in selected economies during and post-COVID-19 pandemic," Economic Analysis and Policy, Elsevier, vol. 87(C), pages 2360-2381.
    4. Gök, Remzi & Bouri, Elie & Gemici, Eray, 2023. "Volatility spillovers between sovereign CDS and futures markets in various volatility states: Evidence from an emerging economy around the pandemic," Research in International Business and Finance, Elsevier, vol. 66(C).
    5. Mattia Guerini & Duc Thi Luu & Mauro Napoletano, 2023. "Synchronization patterns in the European Union," Applied Economics, Taylor & Francis Journals, vol. 55(18), pages 2038-2059, April.
    6. Jean-Philippe Bouchaud & Iacopo Mastromatteo & Marc Potters & Konstantin Tikhonov, 2022. "Excess Out-of-Sample Risk and Fleeting Modes," Papers 2205.01012, arXiv.org.
    7. He, Bei & Tang, Mingyue & Zhang, Chenming, 2024. "Financial technology, regional financial agglomeration, and urban economic resilience," Finance Research Letters, Elsevier, vol. 68(C).
    8. Zhang, Yi & Zhou, Long & Wu, Baoxiu & Liu, Fang, 2024. "Tail risk transmission from the United States to emerging stock Markets: Empirical evidence from multivariate quantile analysis," The North American Journal of Economics and Finance, Elsevier, vol. 73(C).
    9. Cesario Mateus & Miramir Bagirov & Irina Mateus, 2024. "Return and volatility connectedness and net directional patterns in spillover transmissions: East and Southeast Asian equity markets," International Review of Finance, International Review of Finance Ltd., vol. 24(1), pages 83-103, March.
    10. Wu, Baoxiu & Wang, Qing, 2025. "Cross-asset contagion and risk transmission in global financial networks," The North American Journal of Economics and Finance, Elsevier, vol. 80(C).
    11. Starkey, Christopher Michael & Tsafack, Georges, 2023. "Measuring financial contagion: Dealing with the volatility Bias in the correlation dynamics," International Review of Financial Analysis, Elsevier, vol. 90(C).
    12. Montassar Riahi & Sophie Nivoix & Olfa Belhassine, 2025. "A wavelet coherence approach to analyze contagion between equity markets during three major crises," Economics Bulletin, AccessEcon, vol. 45(1), pages 139-149.
    13. Montassar Riahi & Sophie Nivoix & Olfa Belhassine, 2025. "A wavelet coherence approach to analyze contagion between equity markets during three major crises," Post-Print hal-05050180, HAL.
    14. Wojciech Grabowski & Jakub Janus, 2024. "Tail dependence in European stock markets amidst the Russo-Ukrainian war: Shifting linkages and their determinants," Working Papers REM 2024/0360, ISEG - Lisbon School of Economics and Management, REM, Universidade de Lisboa.
    15. Molero González, Laura & Cerqueti, Roy & Mattera, Raffaele & Sánchez Granero, Miguel Ángel & Trinidad Segovia, Juan Evangelista, 2025. "Analyzing clustered factors in the cryptocurrency market with Random Matrix Theory," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 665(C).
    16. Izzeldin, Marwan & Muradoğlu, Yaz Gülnur & Pappas, Vasileios & Petropoulou, Athina & Sivaprasad, Sheeja, 2023. "The impact of the Russian-Ukrainian war on global financial markets," International Review of Financial Analysis, Elsevier, vol. 87(C).
    17. Wen-Jie Xie & Na Wei & Wei-Xing Zhou, 2020. "Evolving efficiency and robustness of global oil trade networks," Papers 2004.05325, arXiv.org.
    18. S. Yfanti & M. Karanasos & J. Wu & P. Vourvachis, 2025. "Short- and long-run cross-border European sustainability interdependences," Annals of Operations Research, Springer, vol. 347(1), pages 579-610, April.
    19. Zhang, Yi & Zhou, Long & Liu, Zhidong & Wu, Baoxiu, 2025. "Spillover of fear among the US and BRICS equity markets during the COVID-19 crisis and the Russo-Ukrainian conflict," The North American Journal of Economics and Finance, Elsevier, vol. 75(PA).
    20. repec:spo:wpmain:info:hdl:2441/5q8fnecj1u87ka099dc571bhi2 is not listed on IDEAS
    21. Ouyang, Fang-Yan & Zheng, Bo & Jiang, Xiong-Fei, 2019. "Dynamic fluctuations of cross-correlations in multi-time scale," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 517(C), pages 515-521.

    More about this item

    Keywords

    ;
    ;
    ;

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:kap:compec:v:66:y:2025:i:6:d:10.1007_s10614-024-10820-0. See general information about how to correct material in RePEc.

    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 CitEc recognized a bibliographic reference but did not link an item in RePEc 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 RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.springer.com .

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

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.