A model for correlations in stock markets

Details A model for correlations in stock markets A model for correlations in stock markets

1999-12-06

arxiv.org/abs/cond-mat/9912076v1

Phys. Rev. E {\bf 61}, 5981 (2000)

Physics

Condensed Matter

Statistical Mechanics

two pages including one EPS file for a figure

Scientific paper

10.1103/PhysRevE.61.5981

We propose a group model for correlations in stock markets. In the group model the markets are composed of several groups, within which the stock price fluctuations are correlated. The spectral properties of empirical correlation matrices reported in [Phys. Rev. Lett. {\bf 83}, 1467 (1999); Phys. Rev. Lett. {\bf 83}, 1471 (1999.)] are well understood from the model. It provides the connection between the spectral properties of the empirical correlation matrix and the structure of correlations in stock markets.

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