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Recurrence quantification analysis of global stock markets

Author

Listed:
  • Joao A. Bastos

    (CEMAPRE, School of Economics and Management (ISEG), Technical University of Lisbon)

  • Jorge Caiado

    (CEMAPRE, School of Economics and Management (ISEG), Technical University of Lisbon)

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

  • Joao A. Bastos & Jorge Caiado, 2010. "Recurrence quantification analysis of global stock markets," CEMAPRE Working Papers 1006, Centre for Applied Mathematics and Economics (CEMAPRE), School of Economics and Management (ISEG), Technical University of Lisbon.
    • Handle: RePEc:cma:wpaper:1006
    as

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    References listed on IDEAS

    as
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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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