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Financial Applications of Random Matrix Theory: a short review


  • J. P. Bouchaud
  • M. Potters


We discuss the applications of Random Matrix Theory in the context of financial markets and econometric models, a topic about which a considerable number of papers have been devoted to in the last decade. This mini-review is intended to guide the reader through various theoretical results (the Marcenko-Pastur spectrum and its various generalisations, random SVD, free matrices, largest eigenvalue statistics, etc.) as well as some concrete applications to portfolio optimisation and out-of-sample risk estimation.

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  • J. P. Bouchaud & M. Potters, 2009. "Financial Applications of Random Matrix Theory: a short review," Papers 0910.1205,
  • Handle: RePEc:arx:papers:0910.1205

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    References listed on IDEAS

    1. Thierry Foucault & Albert J. Menkveld, 2008. "Competition for Order Flow and Smart Order Routing Systems," Journal of Finance, American Finance Association, vol. 63(1), pages 119-158, February.
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    1. repec:eee:stapro:v:126:y:2017:i:c:p:33-40 is not listed on IDEAS
    2. Reigneron, Pierre-Alain & Allez, Romain & Bouchaud, Jean-Philippe, 2011. "Principal regression analysis and the index leverage effect," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 390(17), pages 3026-3035.
    3. Esteban Guevara Hidalgo, 2015. "Bin Size Independence in Intra-day Seasonalities for Relative Prices," Papers 1501.05176,, revised Dec 2016.
    4. Luu, Duc Thi & Yanovski, Boyan & Lux, Thomas, 2018. "An analysis of systematic risk in worldwide econonomic sentiment indices," Economics Working Papers 2018-03, Christian-Albrechts-University of Kiel, Department of Economics.
    5. Dalibor Eterovic & Nicolas Eterovic, 2012. "Separating the Wheat from the Chaff: Understanding Portfolio Returns in an Emerging Market," Working Papers wp_025, Adolfo Ibáñez University, School of Government.

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