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Universal and non-universal properties of cross-correlations in financial time series

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Listed:
  • Vasiliki Plerou
  • Parameswaran Gopikrishnan
  • Bernd Rosenow
  • Luis A. Nunes Amaral
  • H. Eugene Stanley

Abstract

We use methods of random matrix theory to analyze the cross-correlation matrix C of price changes of the largest 1000 US stocks for the 2-year period 1994-95. We find that the statistics of most of the eigenvalues in the spectrum of C agree with the predictions of random matrix theory, but there are deviations for a few of the largest eigenvalues. We find that C has the universal properties of the Gaussian orthogonal ensemble of random matrices. Furthermore, we analyze the eigenvectors of C through their inverse participation ratio and find eigenvectors with large inverse participation ratios at both edges of the eigenvalue spectrum--a situation reminiscent of results in localization theory.

Suggested Citation

  • 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.
  • Handle: RePEc:arx:papers:cond-mat/9902283
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    File URL: http://arxiv.org/pdf/cond-mat/9902283
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