Dissecting financial markets: sectors and states

Matteo Marsili

Quantitative Finance, 2002, vol. 2, issue 4, 297-302

Abstract: By analysing a large data set of daily returns with the maximum likelihood data clustering technique, we identify economic sectors as clusters of assets with a similar economic dynamics. The sector size distribution follows Zipf's law. Secondly, we find that patterns of daily market-wide economic activity cluster into classes that can be identified with market states. The distribution of frequencies of market states shows scale-free properties and the memory of the market state process extends to long times (∼50 days). Assets in the same sector behave similarly across states. We characterize market efficiency by analysing the market's predictability and find that the market is indeed close to being efficient. We find evidence of the existence of a dynamic pattern after the market's crashes.

Date: 2002
References: Add references at CitEc
Citations: View citations in EconPapers (22)

Downloads: (external link)
http://www.tandfonline.com/doi/abs/10.1088/1469-7688/2/4/305 (text/html)
Access to full text is restricted to subscribers.

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:taf:quantf:v:2:y:2002:i:4:p:297-302

Ordering information: This journal article can be ordered from
http://www.tandfonline.com/pricing/journal/RQUF20

DOI: 10.1088/1469-7688/2/4/305

Access Statistics for this article

Quantitative Finance is currently edited by Michael Dempster and Jim Gatheral

More articles in Quantitative Finance from Taylor & Francis Journals
Bibliographic data for series maintained by Chris Longhurst ().