Random magnets and correlations of stock price fluctuations

Bernd Rosenow, Parameswaran Gopikrishnan, Vasiliki Plerou and H.Eugene Stanley

Physica A: Statistical Mechanics and its Applications, 2002, vol. 314, issue 1, 762-767

Abstract: Random magnets provide a paradigm for the study of competing interactions and frustration in physics. Here, we suggest that this paradigm is also useful for the study and explanation of correlations between stock price changes of different companies: it (i) provides for a mechanism to explain the origin of correlations, (ii) allows to understand the occurrence of power-law correlations in the time series of highly correlated eigenmodes, and (iii) is a useful framework for the analysis of optimal investment strategies where the knowledge of (anti-)correlations is an important prerequisite for the reduction of risk.

Keywords: Random Magnets; Cross-correlations; Econophysics (search for similar items in EconPapers)
Date: 2002
References: View complete reference list from CitEc
Citations: View citations in EconPapers (3)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S037843710201049X
Full text for ScienceDirect subscribers only. Journal offers the option of making the article available online on Science direct for a fee of $3,000

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:phsmap:v:314:y:2002:i:1:p:762-767

DOI: 10.1016/S0378-4371(02)01049-X

Access Statistics for this article

Physica A: Statistical Mechanics and its Applications is currently edited by K. A. Dawson, J. O. Indekeu, H.E. Stanley and C. Tsallis

More articles in Physica A: Statistical Mechanics and its Applications from Elsevier
Bibliographic data for series maintained by Catherine Liu ().