Cross-correlation in financial dynamics

J. Shen and B. Zheng

Papers from arXiv.org

Abstract: To investigate the universal structure of interactions in financial dynamics, we analyze the cross-correlation matrix C of price returns of the Chinese stock market, in comparison with those of the American and Indian stock markets. As an important emerging market, the Chinese market exhibits much stronger correlations than the developed markets. In the Chinese market, the interactions between the stocks in a same business sector are weak, while extra interactions in unusual sectors are detected. Using a variation of the two-factor model, we simulate the interactions in financial markets.

Date: 2012-02
New Economics Papers: this item is included in nep-cwa, nep-mac and nep-tra
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Published in published in EPL (Europhysics Letters), Volume 86, Issue 4, pp. 48005 (2009)

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