Increasing market efficiency: Evolution of cross-correlations of stock returns

Bence Toth and Janos Kertesz

Papers from arXiv.org

Abstract: We analyse the temporal changes in the cross correlations of returns on the New York Stock Exchange. We show that lead-lag relationships between daily returns of stocks vanished in less than twenty years. We have found that even for high frequency data the asymmetry of time dependent cross-correlation functions has a decreasing tendency, the position of their peaks are shifted towards the origin while these peaks become sharper and higher, resulting in a diminution of the Epps effect. All these findings indicate that the market becomes increasingly efficient.

Date: 2005-06, Revised 2005-06
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Published in Physica A 360, 505-515 (2006)

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Persistent link: https://EconPapers.repec.org/RePEc:arx:papers:physics/0506071

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