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Phase transition in the S&P stock market

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  • Raddant, Matthias
  • Wagner, Friedrich

Abstract

We analyze the stock prices of the S&P market from 1987 to 2012 with the covariance matrix of the firm returns determined in time windows of several years. The eigenvector belonging to the leading eigenvalue (market) exhibits in its long term time dependence a phase transition with an order parameter which can be interpreted within an agent model. From 1995 to 2005 the market is in an ordered state and after 2005 in a disordered state. We show that the influence of stocks on the market is changing and that this influence can be explained by trading volume and the stocks' beta.

Suggested Citation

  • Raddant, Matthias & Wagner, Friedrich, 2013. "Phase transition in the S&P stock market," Kiel Working Papers 1846, Kiel Institute for the World Economy (IfW).
    • Handle: RePEc:zbw:ifwkwp:1846
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    References listed on IDEAS

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    Cited by:

    1. repec:taf:quantf:v:17:y:2017:i:2:p:289-297 is not listed on IDEAS
    2. Matthias Raddant & Friedrich Wagner, 2017. "Transitions in the stock markets of the US, UK and Germany," Quantitative Finance, Taylor & Francis Journals, vol. 17(2), pages 289-297, February.
    3. Kyrtsou, Catherine & Mikropoulou, Christina & Papana, Angeliki, 2016. "Does the S&P500 index lead the crude oil dynamics? A complexity-based approach," Energy Economics, Elsevier, vol. 56(C), pages 239-246.

    More about this item

    Keywords

    stock price correlations; CAPM; S&P500;

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates

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