ON THE APPLICATION OF THE CROSS-CORRELATIONS IN THE CHINESE FUND MARKET: DESCRIPTIVE PROPERTIES AND SCALING BEHAVIORS

Weibing Deng (), Wei Li, Xu Cai and Qiuping A. Wang
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Weibing Deng: ISMANS, 44, Ave. Bartholdi, 72000 Le Mans, France;
Wei Li: Complexity Science Center & Institute of Particle Physics, Hua-Zhong (Central China), Normal University, Wuhan 430079, China;
Xu Cai: Complexity Science Center & Institute of Particle Physics, Hua-Zhong (Central China), Normal University, Wuhan 430079, China
Qiuping A. Wang: ISMANS, 44, Ave. Bartholdi, 72000 Le Mans, France;

Advances in Complex Systems (ACS), 2011, vol. 14, issue 01, 97-109

Abstract: On the basis of the relative daily logarithmic returns of 88 different funds in the Chinese fund market (CFM) from June 2005 to October 2009, we construct the cross-correlation matrix of the CFM. It is shown that the logarithmic returns follow an exponential distribution, which is commonly shared by some emerging markets. We hereby analyze the statistical properties of the cross-correlation coefficients in different time periods, such as the distribution, the mean value, the standard deviation, the skewness and the kurtosis. By using the method of the scaled factorial moment, we observe the intermittence phenomenon in the distribution of the cross-correlation coefficients. Also by employing the random matrix theory (RMT), we find a few isolated large eigenvalues of the cross-correlation matrix, and the distribution of eigenvalues exhibits the power-law tails. Furthermore, we study the features of the correlation strength with a simple definition.

Keywords: Cross-correlation; random matrix theory; scaled factorial moment; correlation strength; power-law (search for similar items in EconPapers)
Date: 2011
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DOI: 10.1142/S0219525911002871

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