Analysis of stock prices of mining business

Sanghyun Ahn, G.C. Lim, S.H. Kim, Soo Yong Kim, Kwon Youb Yoon, Joseph Lee Stanfield and Kyungsik Kim

Physica A: Statistical Mechanics and its Applications, 2011, vol. 390, issue 12, 2340-2349

Abstract: Stock exchanges have a diversity of so-called business groups and much evidence has been presented by covariance matrix analysis (Laloux et al. (1999) [6], Plerou et al. (2002) [7], Plerou et al. (1999) [8], Mantegna (1999) [9], Utsugi et al. (2004) [21] and Lim et al. (2009) [26]). A market-wide effect plays a crucial role in shifting the correlation structure from random to non-random. In this work, we study the structural properties of stocks related to the mining industry, especially rare earth minerals, listed on two exchanges, namely the TSX (Toronto stock exchange) and the TSX-V (Toronto stock exchange-ventures). In general, raw-material businesses are sensitively affected by the global economy while each firm has its own cycle. We prove that the global crisis during 2006–2009 affected the mineral market considerably. These two aspects compete to control price fluctuations. We show that the internal cycle overwhelms the global economic environment in terms of random matrix theory and overlapping matrices. However, during the period of 2006–2009, the effect of the global economic environment emerges. This result is well explained by the recent global financial/economic crisis. For comparison, we analyze the time stability of business clusters of the KOSPI, that is, the electric/electronic business, using an overlapping matrix. A clear difference in behavior is confirmed. Consequently, rare earth minerals in the raw-material business should be classified not by standard business classifications but by the internal cycle of business.

Keywords: Mining business; Random matrix theory; Correlation matrix; Inverse participation ratio; Time-lag cross correlations (search for similar items in EconPapers)
Date: 2011
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Persistent link: https://EconPapers.repec.org/RePEc:eee:phsmap:v:390:y:2011:i:12:p:2340-2349

DOI: 10.1016/j.physa.2011.02.025

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