Physics – Condensed Matter – Statistical Mechanics
Scientific paper
2000-09-26
Physics
Condensed Matter
Statistical Mechanics
8 pages, 5 figures, 3 tables
Scientific paper
10.1007/s100510170229
We investigate the variety of a portfolio of stocks in normal and extreme days of market activity. We show that the variety carries information about the market activity which is not present in the single-index model and we observe that the variety time evolution is not time reversal around the crash days. We obtain the theoretical relation between the square variety and the mean return of the ensemble return distribution predicted by the single-index model. The single-index model is able to mimic the average behavior of the square variety but fails in describing quantitatively the relation between the square variety and the mean return of the ensemble distribution. The difference between empirical data and theoretical description is more pronounced for large positive values of the mean return of the ensemble distribution. Other significant deviations are also observed for extreme negative values of the mean return.
Lillo Fabrizio
Mantegna Rosario Nunzio
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