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Please use this identifier to cite or link to this item: http://bura.brunel.ac.uk/handle/2438/3657

Title: Universal correlations and power-law tails in financial covariance matrices
Authors: Akemann, G
Fischmann, J
Vivo, P
Keywords: Random matrices
Financial covariance matrices
Publication Date: 2010
Publisher: Elsevier
Citation: Physica A. 289(13): 2566–2579, Jul 2010
Abstract: Signatures of universality are detected by comparing individual eigenvalue distributions and level spacings from financial covariance matrices to random matrix predictions. A chopping procedure is devised in order to produce a statistical ensemble of asset-price covariances from a single instance of financial data sets. Local results for the smallest eigenvalue and individual spacings are very stable upon reshuffling the time windows and assets. They are in good agreement with the universal Tracy-Widom distribution and Wigner surmise, respectively. This suggests a strong degree of robustness especially in the low-lying sector of the spectra, most relevant for portfolio selections. Conversely, the global spectral density of a single covariance matrix as well as the average over all unfolded nearest-neighbour spacing distributions deviate from standard Gaussian random matrix predictions. The data are in fair agreement with a recently introduced generalised random matrix model, with correlations showing a power-law decay.
URI: http://bura.brunel.ac.uk/handle/2438/3657
DOI: http://dx.doi.org/10.1016/j.physa.2010.02.026
ISSN: 0378-4371
Appears in Collections:Mathematical Physics
Dept of Mathematics Research Papers

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