Empirical properties of the variety of a financial portfolio and the single-index model

F. Lillo and Rosario Mantegna
Additional contact information
F. Lillo: Max-Planck Institut für Physik komplexer Systeme, Nöthnizer Str. 38, 01187 Dresden, Germany and Istituto Nazionale per la Fisica della Materia, Unità di Palermo, Viale delle Scienze, 90128 Palermo, Italy

The European Physical Journal B: Condensed Matter and Complex Systems, 2001, vol. 20, issue 4, 503-509

Abstract: Abstract: We investigate the variety of a portfolio of stocks in normal and extreme days of market activity. We show that the variety carries information about the market activity which is not present in the single-index model and we observe that the variety time evolution is not time reversal around the crash days. We obtain the theoretical relation between the square variety and the mean return of the ensemble return distribution predicted by the single-index model. The single-index model is able to mimic the average behavior of the square variety but fails in describing quantitatively the relation between the square variety and the mean return of the ensemble distribution. The difference between empirical data and theoretical description is more pronounced for large positive values of the mean return of the ensemble distribution. Other significant deviations are also observed for extreme negative values of the mean return.

Keywords: PACS. 02.50.Ey Stochastic processes – 05.40.-a Fluctuation phenomena; random processes; noise; and Brownian motion – 89.90.+n Other topics in areas of applied and interdisciplinary physics (search for similar items in EconPapers)
Date: 2001
References: Add references at CitEc
Citations: View citations in EconPapers (4)

Downloads: (external link)
http://link.springer.com/10.1007/s100510170229 Abstract (text/html)
Access to the full text of the articles in this series is restricted.

Related works:
Working Paper: Empirical properties of the variety of a financial portfolio and the single-index model (2000)
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:spr:eurphb:v:20:y:2001:i:4:d:10.1007_s100510170229

Ordering information: This journal article can be ordered from
http://www.springer.com/economics/journal/10051

DOI: 10.1007/s100510170229

Access Statistics for this article

The European Physical Journal B: Condensed Matter and Complex Systems is currently edited by P. Hänggi and Angel Rubio

More articles in The European Physical Journal B: Condensed Matter and Complex Systems from Springer, EDP Sciences
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().