Analysis of Financial Correlation Matrix Using Random Matrix Theory

We analyzed the distribution of the eigenvalues of the empirical cross correlation matrix constructed from the data of Chinese stock market and the distribution of the components of some eigenvectors corresponding to certain eigenvalues. Compared with the analytical random matrix theory results, we...

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Bibliographic Details
Published in2011 Fourth International Conference on Business Intelligence and Financial Engineering pp. 311 - 314
Main Authors Zhu Meiying, Zhang Bin
Format Conference Proceeding
LanguageEnglish
Published IEEE 01.10.2011
Subjects
Correlation
correlation matrix
Eigenvalues and eigenfunctions
Investments
Noise
Portfolios
random matrix theory
Stock markets
Time series analysis
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Summary:We analyzed the distribution of the eigenvalues of the empirical cross correlation matrix constructed from the data of Chinese stock market and the distribution of the components of some eigenvectors corresponding to certain eigenvalues. Compared with the analytical random matrix theory results, we found that a small part of eigenvalues are out of the range of random matrix theory results and that the distribution of the components of the eigenvector corresponding to the largest eigenvalue is evidently different from that of random matrix theory. These results are similar to the analysis of foreign stock market.
ISBN:1457715414
9781457715419
DOI:10.1109/BIFE.2011.15